Market Structure Perfect Competition Monopolistic Oligopoly Monopoly

competition (A Monopolist)
Assumption/Characteristic
Number of sellers: Many sellers (many buyers) A few large firms 1 seller
that dominate the
market.
Nature of product Identical/Homogenous Differentiated Homogenous or unique
Marketing ways can be
Distributor, differentiated
better Non Price
employee Competition:
Advertising,
Royalty Debates,
Free gift
Barriers to entry Free entry and no exit (no barrier) High Barriers to entry.
Natural:
Economies of scale: (high fixed
cost).
Man Made Barriers:
(Legal government created barriers:
licensing).
-Suppliers (import rights or selling
rights)

Information Perfect Imperfect

Other Information
Demand curve Market: downward Downward Downward Market:
sloping. Firm: sloping: demand sloping kinked to Downward
Horizontal is price elastic. demand curve. Sloping (steep
(gentle slope) slope)
Demand is price
inelastic
Short run profit 1. Super-normal profit.2. subnormal profit3.normal profit
Long run profit Normal Profit (due to free entry and exit) Supernormal, normal profit
Efficiency Productive & Productive Inefficient (P>Minimum LRAC)
Allocative Allocative Inefficient (P>MC)
Social welfare Maximised Not maximise (due to presence of weight loss)
Reduction in consumer surplus and producer surplus.
Shut down P<AVC Firm shut down (temporarily until market condition move)
condition
This causes an increase in the number of sellers and market supply curve shifts right.  Market
equilibrium price falls and the firm as a price taker, accepts the new lower market equilibrium price.
 Demand curve (AR) of the firm falls until it is tangent to the ATC curve where AR=ATC at optimal
output and zero profits are made.  Firms no longer have an incentive to enter.  The market is in
long run equilibrium where normal profits are made
1. What is shoes leather Cost?

2.How does inflation affect in interest rate? Is it