Efficiency of different market structures

Efficiency of different market structures

1. Types of market structures

   • Perfect competition
     • Many firms, they are price takers, produce homogeneous products. The market structure requires perfect knowledge
   • Imperfect competition
     • Monopolistic
       • Large number of firms which are selling goods and services that are close substitutes to their competitors, has weak barriers to entry.
     • Oligopoly
       • Has few firm which produce goods or services that are lose substitutes and are typically large scale. They are price makers, trying to increase market share as to avoid price wars . They have strong barriers to entry
     • Monopsony
       • Is the sole buyer of a product
     • Monopoly
       • A single seller of a good or service, as strong barriers to entry like oligopolies, however they do have limitations
         • Limitation one: due to consumers incomes being limited they cannot be too exorbitant with their pricing
         • Limitation two: government can break up or control their prices if they become too high.
         • A monopolist can either set the price or quantity but not both, as if the price is set the market will determine the quantity sold, ceteris paribus

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