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3.4: Market Structures and Perfect Competition
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AP Microeconomics notes from Unit 3, Section 4: These notes cover market structures, perfect competition, barriers to entry, and demand.
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AP Microeconomics - Market Structures and Perfect Competition
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Some examples from this set of practice questions
1.
List the four types of market structures.
Answer: Perfect competition, monopolistic competition, oligopolies, and monopolies
2.
Which market structures are types of imperfect competition?
Answer: Monopolistic competition, oligopolies, and monopolies
3.
What are some characteristics of perfect competition?
Answer: Many small firms that sell identical products (perfect substitutes for each other) Low barriers to entry — easy for firms to enter and exit the industry Seller has no need to advertise Firms are “price takers” (individual firms have no control over the price)
4.
What are some characteristics of monopolistic competition?
Answer: A relatively large number of sellers that sell differentiated products Some control over price Low barriers to entry — easy for firms to enter Lots of non-price competition
5.
What are some characteristics of oligopolies?
Answer: A few large producers (<10) that sell identical or differentiated products High barriers to entry Control over price (”price makers”) Mutual interdependence
6.
What are some characteristics of monopolies?
Answer: One large firm (the firm is the market) that sells a unique product (no close substitutes) High barriers to entry — firms cannot enter the industry Monopolies are “price makers” (set the industry price)
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