1. Market Structures
Lesson 10
Module 57

2. Market Structures (57) Types of Market Structures: Four Primary Models
Perfect Competition
Monopoly
Oligopoly
Monopolistic Competition
Market Structures are based on
Number of Firms in the market (One, few, many)
Goods offered are identical or differentiated

3. Competition Conditions of Perfect Competition
Perfect competition is the goal of economists for a stable free market.
Many sellers
Selling identical products
Able to enter and exit the market freely
None of them are large enough to influence prices.
There need to also be many well-informed buyers, all looking for the best prices. This keeps the system in equilibrium.
Price Takers and Price Makers
Market Share
Commodity (Standardized Product)

4. Barriers to Entry
Competitiveness in markets largely has to do with the ease with which new firms can enter the market.
Markets that require a lot of technical knowledge (computer hardware), large amounts of infrastructure (oil, transportation, factories), or difficult to get resources have large start up costs.
In these cases, there remains a relatively few businesses that are in the market, making perfect competition improbable.

5. Monopolies
Monopolies exist when there is a single supplier for a good, and the barriers to entry prevent other suppliers from entering the market.
Control of Scarce Resources
Economy of Scale
Technological Superiority
Government-created barriers
Patent or Copyright
While monopolies are generally considered to be bad because they can limit the quantity supplied and can charge whatever they want, there are other kinds of monopolies that economists love.

6. Oligopoly
An oligopoly is a situation where there are a few firms that produce very similar products, but are different in some variation. Cola companies would fall into this category.
The conditions for an oligopoly are:
Few firms
Barriers to entry are high
Some control over prices
Products are slightly different
Market Concentration
How concentrated is the market?
Four and Eight Firm ratios

7. Monopolistic Competition
Monopolistic competition are where there are
Many firms
Barriers to entry are low
Some control over prices
Some variation of goods.
There are many examples of these kinds of businesses, like retail stores, or gas stations. They tend to have some kind of brand image, and differentiate themselves by service, product quality, or features.
Chinese Food versus Mexican Food
Not Perfect Competition (Products are different)
Not A Monopoly (faces competition)
Not An Oligopoly (many firms, free entry)