Market Structure Essay

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Nathan Adams AP Econ Intro to Market Structures 1. a. -Monopoly -Oligopoly -Perfect Competition -Monopolistic Competition b. The market system is based on two main dimensions: -The umber of firms in the market (one, few, many) -Weather the goods offered are identical or differentiated c. -The number of firms in a market decides weather the market is a monopoly, oligopoly, or a competitive Markey. - The differentiation of the products decided what competition type it is. (Perfect or Monopolistic) 2. Monopoly - A Monopoly exists when there is one company that controls the output of a product that has no close substitutes. This usually occurs when the market has barriers to entry. Such as one company having control of a scarce resource or input, or having a large technological advantage. Other barriers include Economies of Scale and government Created barriers. Oligopoly -This is an industry in which there are only a few firms. Oligopolists compete against each other for sales but it isn’t like perfect competition, the major difference is that in Oligopolies can affect the market. This is known as imperfect competition. Oligopolies have barriers to entry similar to those of a monopoly just that they are weaker and that’s what allows a couple of companies to survive. Perfect Competition -This occurs when there are a lot of companies making the same product. They have no power over the market and are called price takers. In the long run they will make zero economic profit, because there are no barriers to entry and if short run profits are being made more companies will enter the market and if short run losses are being taken then companies will leave the industry. Monopolistic Competition -This involves a large number of companies that produce similar but not exactly the same products. Each producer has some control over the market

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