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_types-of-market-structures.webp "Types of market structures<br/>In a perfectly competitive market, prices reflect an economy's collective wisdom, but in a monopolistic market, they reflect one company's absence of wisdom.<br/>Perfect Competition:<br/>Characteristics:<br/>Many buyers and sellers.<br/>Homogeneous (identical) products.<br/>Easy entry and exit for firms.<br/>Perfect information for all participants.<br/>No single firm can influence the market price.<br/>Implications:<br/>Prices are determined by market forces (supply and demand).<br/>Monopoly:<br/>Characteristics:<br/>Single seller dominating the market.<br/>Unique product with no close substitutes.<br/>Significant barriers to entry.<br/>Price maker – the firm has control over the price.<br/>Implications:<br/>The monopolist can set the price to maximize profits.<br/>Limited consumer choice.<br/>Potential for reduced efficiency and innovation. Firms are price takers, meaning they accept the market price.<br/>Oligopoly:<br/>Characteristics:<br/>Small number of large firms dominate the market.<br/>Products can be homogeneous or differentiated.<br/>Significant barriers to entry.<br/>Mutual interdependence among firms.<br/>Implications:<br/>Firms may engage in non-price competition (advertising, branding, etc.).<br/>Price and output decisions are influenced by the actions of competitors.<br/>Collusion is possible but often regulated.<br/>Monopolistic Competition:<br/>Characteristics:<br/>Many firms, each producing a differentiated product.<br/>Relatively easy entry and exit.<br/>Some control over price due to product differentiation.<br/>Implications:<br/>Firms have a degree of market power but are price setters to a limited extent.<br/>Non-price competition is common through advertising and product differentiation.<br/>Consumers have a range of similar but not identical products to choose from.")
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