Market Structure



Market Structure |# of Firms |Products |Influence over Price |Amount of Competition |Advertising (non-price competition) |Barriers to enter/exit market |Profits |Best/Worst for Consumers | |Perfect (pure) Competition

(agricultural products)

|Many |Identical |Market establishes price

(price taker) |Great amount of competition |None necessary – identical products at identical prices |Few – easy entry/easy exit |No long-run profits |Great for consumers because prices are low | |Monopolistic Competition

(Shoes, fast food hamburgers)

|Large number of firms |Similar, but differentiated products |Producers have a little more control due to differentiated product |Lots of competition |Advertising necessary to demonstrate differentiated products |Few |Some profit |Good for consumers due to competition level | |Oligopoly

(Breakfast cereal, cars)

|A few large firms |Similar, but differentiated products |Producers work together to set prices (collusion) |Fair amount of competition |Advertising is necessary due to similarities |Few |Some profit |More favorable for producers due to collusion | |Monopoly

(Georgia Power, Microsoft)

|One large firm |Unique product |Producer controlled

(price maker) |No competition |None necessary – no substitutes |Many |High profit |Bad for consumers | |Market Structures

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