Market Structures
The different types of markets and
the way in which businesses
compete
Four Market Structures
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Perfect Competition
Monopolistic Competition
Oligopoly
Monopoly
Terms to understand
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Number of firms – How many
businesses compete in the market?
Barrier to entry – any factor that
makes it difficult for a new firm to
enter the market
Variety of goods – How different are
the products?
Control over Prices – How much
control do the firms have over their
prices?
Perfect Competition (Pure
Competition)


A market with a large number of
firms all producing essentially
the same product.
Assumptions:
The Market is in equilibrium
 All firms sell the same product for
the same price.
 No single firm can influence
prices.

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They each have such a small share
of the market.
Four Conditions for Perfect
Competition
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1. Many buyers and sellers
participate in the market.
2. Sellers offer identical
products.
3. Buyers and sellers are well
informed about the products
4. Sellers are able to enter and
exit the market freely.
Monopoly

When there is one company or
firm that supplies the market
with a good or service.
Barriers to entry limit other firms
from entering the market.
 Barriers are the principle condition
for monopolies to exist.

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There are many buyers.
Monopolistic Competition
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Where many companies
compete in an open market to
sell products that are similar but
not identical.
Each firm holds a monopoly
over its own particular product.
A modified version of perfect
competition with minor
differences in products.
Conditions of Monopolistic
Competition

1. Many firms.


2. Few artificial barriers to entry.

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Lower start up costs allow new
firms to join the market.
No patents, licenses,etc…
3. Slight control over price.
4. Differentiated Products.
Oligopoly

A market dominated by a few
large, profitable firms.

If the four largest firms produce at
least 70 to 80 percent of the
output.
Which Market Structure?
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Televisions
Bottle Water
Cell Phone Carriers
Grapes
Computers
Paperclips
City water
Video Game Systems
Corn
Public schools