Adam El Masmoudi Garcia [Edition 1, Volume 1]
Market Structure is one of the important elements to understand how market will function
and determine the behavior of firms in the market and the outcome that will be produced by the
market.
The four basic types of market structure are:
Perfect Competition
EYEING
Oligopoly
Monopoly THE FØUR BASIC
MARKET STRUCTURES
Monopolistic Competition
Perfect Competition Perfect competition happens when Oligopoly An oligopoly is an industry dominated by only
numerous small firms compete against each other. It has 3 a few firms. When a market is shared between a few
characteristics: there are many buyers and sellers, goods firms, it is said to be highly concentrated.
are homogenous and there is free entry and exit into and However, because of strong incentives to cheat on
out of the market. collusive agreements, oligopoly firms often end up
competing against each other.
Example: Local farmers would be an example as there are
numerous farmers, selling the same fruits, vegetables and Example: The auto industry is another example of an
herbs, and you can easily find out the prices for the goods, oligopoly, with the leading auto manufacturers in the
but they are usually all about the same. United States being Ford, GMC and Chrysler.
Monopolistic Competition In a monopolistic Monopoly A monopoly is a firm that has no competitors
competition, an industry contains many competing firms, in its industry. This market is composed of a sole seller
each of which has a similar but at least slightly different who will therefore have full power to set prices. The entry
product. There is freedom to enter or leave the market, as barrier is very high to this market.
there are no major barriers to entry or exit, and each firm
makes independent decisions about price and output, Example: The railway network of any country is an
based on its product, its market, and its costs of example of a monopoly as there is just one railway
production. network for every country.
Example: Restaurants all serve food but of different types
and in different locations. Production costs are above what INFO TABLE
could be achieved if all the firms sold identical products,
but consumers benefit from the variety.
THE FOUR BASIC MARKET STRUCTURES
Market Structure is one of the important elements to understand how market will function
and determine the behavior of firms in the market and the outcome that will be produced by the
market.
The four basic types of market structure are:
Perfect Competition
EYEING
Oligopoly
Monopoly THE FØUR BASIC
MARKET STRUCTURES
Monopolistic Competition
Perfect Competition Perfect competition happens when Oligopoly An oligopoly is an industry dominated by only
numerous small firms compete against each other. It has 3 a few firms. When a market is shared between a few
characteristics: there are many buyers and sellers, goods firms, it is said to be highly concentrated.
are homogenous and there is free entry and exit into and However, because of strong incentives to cheat on
out of the market. collusive agreements, oligopoly firms often end up
competing against each other.
Example: Local farmers would be an example as there are
numerous farmers, selling the same fruits, vegetables and Example: The auto industry is another example of an
herbs, and you can easily find out the prices for the goods, oligopoly, with the leading auto manufacturers in the
but they are usually all about the same. United States being Ford, GMC and Chrysler.
Monopolistic Competition In a monopolistic Monopoly A monopoly is a firm that has no competitors
competition, an industry contains many competing firms, in its industry. This market is composed of a sole seller
each of which has a similar but at least slightly different who will therefore have full power to set prices. The entry
product. There is freedom to enter or leave the market, as barrier is very high to this market.
there are no major barriers to entry or exit, and each firm
makes independent decisions about price and output, Example: The railway network of any country is an
based on its product, its market, and its costs of example of a monopoly as there is just one railway
production. network for every country.
Example: Restaurants all serve food but of different types
and in different locations. Production costs are above what INFO TABLE
could be achieved if all the firms sold identical products,
but consumers benefit from the variety.
THE FOUR BASIC MARKET STRUCTURES
