๐ Topic Summary
Market structure refers to the characteristics of a market that influence the behavior of firms within that market. Key determinants include the number and size of firms, the degree of product differentiation, the ease of entry and exit, and the availability of information. Understanding these factors is crucial for analyzing how markets function and how firms compete.
Different market structures, such as perfect competition, monopolistic competition, oligopoly, and monopoly, exhibit different characteristics. For instance, a perfectly competitive market features many small firms, homogeneous products, and free entry and exit, while a monopoly involves a single firm dominating the market. Identifying these structures helps in predicting market outcomes and evaluating the effectiveness of various policies.
๐ง Part A: Vocabulary
Match the following terms with their correct definitions:
| Term |
Definition |
| 1. Monopoly |
A. A market structure with many firms selling differentiated products. |
| 2. Oligopoly |
B. A market structure with a single seller. |
| 3. Perfect Competition |
C. A market structure with a few dominant firms. |
| 4. Monopolistic Competition |
D. The ability of a firm to influence the price of its product. |
| 5. Market Power |
E. A market structure with many firms selling identical products. |
(Answers: 1-B, 2-C, 3-E, 4-A, 5-D)
โ๏ธ Part B: Fill in the Blanks
Complete the following paragraph using the words provided: barriers, differentiated, firms, homogeneous, number.
The structure of a market depends on several factors. The _______ of _______ operating in the market is a primary determinant. If products are _______, and there are low _______ to entry, the market tends to be more competitive. Conversely, if products are _______ and entry is difficult, a few large companies might dominate.
(Answers: number, firms, differentiated, barriers, homogeneous)
๐ค Part C: Critical Thinking
How do high barriers to entry affect market structure and the behavior of firms within that market? Provide specific examples.