Characteristics
Market
Structure
Entry and
Number of Barriers
Exit
Homogeneous or Differentiated Product?
Buyers
to Entry
Activity
Number of Sellers
Pure
Many firms
Competition
Many firms with nonMonopolistic
interdependent pricing and
Competition
quantity decisions
Yes, firms
have the
Homogeneous product, all goods are perfect
freedom to
substitutes for consumers
enter and
exit
Many
buyers
None
Many
buyers
Yes, firms
have the
Differentiated products, but close substitutes
Very low freedom to for consumers so their demand curves are
enter and elastic
exit
Oligopoly
Few firms
withinterdependent pricing
and quantity decision
Unspecified High
Difficult
entry
(often due Products can be either differentiated or nonto
differentiated
economies
of scale)
Pure
Monopoly
Single seller
Unspecified Complete
entry
blocked
A single, homogeneous product with no close
substitutes
Characteristics
Market Structure
Short Run
Profits?
Long Run Profits?
Price Taker or
Price Searcher?
Draw the demand curve facing the firm
Pure Competition
Available
No
Price Taker - the
firm chooses
quantity but takes Perfectly elastic
price from the
market
Monopolistic
Competition
Available
No
Price Searcher
Very elastic, but not perfectly elastic
because close substitutes exist
Oligopoly
Available
Available if entry is
blocked and the colluding
cartel holds together
Price Searcher
(This is unlikely because
cartels tend to fall apart.)
Inelastic, to be an effective oligopoly
Pure Monopoly
Available
Available
Inelastic, to be an effective monopoly
Price Searcher