7.6 Different market structures

Question 1

Market structure

Answer 1

the way in which a market is organised in terms of the number of firms and the barriers to the entry of new firms

Question 2

Barriers to entry

Answer 2

any restrictions that prevent new firms from entering an industry

Question 3

Perfect competition

Answer 3

an ideal market structure that has many buyer and seller, identical or homogeneous products, no barriers to entry

Question 4

Monopoly

Answer 4

a pure monopoly is just one firm in an industry with very high barriers to entry

Question 5

Monopolistic competition

Answer 5

a market structure where there are many firms, differentiated products and few barriers to entry

Question 6

Oligopoly

Answer 6

a market structure with few firms and high barriers to entry

Question 7

Imperfect competition

Answer 7

any market structure expects for perfect competition

Question 8

Natural monopoly

Answer 8

where a single supplier has substantial cost advantages such that competing producers would raise costs and where duplication will produce an inefficient use of resources

Question 9

Barrier to exit

Answer 9

any restriction that prevents a firm leaving a market

Question 10

Contestable market

Answer 10

any market structure where there is a threat that potential entrants are free and able to enter this market

Question 11

X - inefficiency

Answer 11

where the typical costs are above those experienced in a more competitive market

Question 12

Game theory

Answer 12

where competing firms exhibit interdependent behaviour whereby the actions of one will impact on all other firms

Question 13

Kinked demand curve

Answer 13

a means of analysing the behaviour of firms in oligopoly where there is no collusion