Los 12.b Flashcards
(4 cards)
What is perfect competition and the characteristics?
- In perfect competition refers to a market in which firms produce indentical products
- Firms face perfectly elastic demand curves
- There usually very low barriers to entry, very good substitutes, nature of competition is in price only and no firm have any pricing power
What is monopolistic competition and the characteristics?
In monopolistic competition all the products are not identical, and the firms differenciates its products from other firms through different in quality, features and marketing.
* The demand curve is downward sloping and prices are unidentical
* Barriers to entry are low, and firms have some pricing power.
What is Oligopoly and the characteristics?
In an oligopoly, there are few firms in the industry, with usually a high barrier to entry (due to economies of scale or marketing). Demand can be more or less elastic than firms in monopolistic competition. Firms compete on price and also quality, and have signficant pricing power.
What is a monopoly and the characteristics?
A monopoly is a market where there is only one seller of a product, and no good substitutes exist. Because of this, the firm faces the entire market demand curve, which slopes downward, meaning it can choose the price it charges.
High barriers to entry—like patents, copyrights, ownership of a key resource, or government regulations—help protect the monopoly from competition. Sometimes, monopolies form naturally because one company controls something essential for making the product. Other times, the government might intentionally create a monopoly, like with a local electric utility, to ensure consistent service.
