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9 Cards in this Set
- Front
- Back
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Def of market structure |
This is a term that explains conditions that exist in a market |
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what’s perfect competition |
this is an imaginary market structure that acts as a benchmark to the real market structure |
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Characteristics of perfect competition |
1) high degree of competition 2) homogeneous products. These are products which are similar or identical to customers 3) no barriers to entry or exit the market 4) perfect knowledge 5)Firms are price takers. This means that goods and services are determined by demand and supply |
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Adv of perfect competition market |
1) consumers sovereignty. As produces produce what is demanded in the market 2) high quality of goods 3) low prices 4) efficiency of resources |
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Disadvantages of perfect competition market |
1) business may not be able to expand and enjoy economies of scale 2) homogeneous products affect consumers choice as they have less variety of goods |
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Def of monopoly |
A market structure with a single supplier of goods and services |
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Characteristics of monopoly |
1) firms are price makers. This because a firm has power to control market price 2) strong barriers to enter into monopoly market. Such as customer loyalty, legal barriers 3) low degree of competition 4) imperfect market due to a single dominant firm in the market 5) a firm has a high degree of market share |
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Adv of monopoly |
1) since monopoly earns supermodel profits, it can be user on research and development. This will lead to better info about the market and develop new products 2) monopoly benefits economies of scale |
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Why do monopolies continue |
This is due the existence of barriers to entry and exits. One type of barrier is legal barrier, this may be a form of a government act. Another barrier is the scale of production. Another is bran loyalty. Sunk costs which are te cost such as advertisment which cannot be recovered if a firm leaves the industry |
