Characteristics of Market Structures

Types of Market Structures: Pure (Perfect) Competition Monopolistic Competition Oligopoly Monopoly

Pure (Perfect) Competition Number of Sellers: Many/Unlimited Barriers to Entry: Low or No Barriers to entry Price Control: None – price taker – must take the market price Product Differentiation: None – Products are identical

Monopolistic Competition Number of Sellers: Many Barriers to Entry: Low Barriers to entry Price Control: Some Product Differentiation: Yes – Firms must engage in non- price competition to distinguish their products from those of competitors

Oligopoly Number of Sellers: Few Large Firms Control the Market Barriers to Entry: High Price control: Yes – Price leadership – when one firm increases or decreases price, the others will follow to maintain market share Product Differentiation: Varies – Oligopoly markets may sell identical or differentiated products – those with differentiated products will use non-price competition

Monopoly Number of Sellers: One Barriers to Entry: High Barriers Price Control: Strong Control over price (price setters) Product Differentiation: Not Applicable – there is only one seller