Market structures and objectives of firms

Question 1

Perfect competition

Answer 1

Many buyers and sellers

Price takers

No barriers to entry

Homogenous products (all the same)

theoretical

Question 2

Monopolistic competition

Answer 2

imperfect competition amongst the many

low barriers to entry

low product differentiation

Question 3

Oligopoly

Answer 3

imperfect competition amongst the few (small number of firms dominate market share)

High barriers to entry

Higher product differentiation

Question 4

Monopoly

Answer 4

One firm in industry (pure) or 25% (legal)

Price makers

High barriers to entry

High product differentiation

Question 5

Profit maximisation in the short run

Answer 5

assumes firms try maximise profit from every action

Question 6

Profit maximisation in the long run

Answer 6

assumes firms are prepared to make lower profits in short run to achieve best possible level of long run output

Question 7

Profit satidficing

Answer 7

satisfactory profit rather than maximisation

Question 8

Other objectives of firms

Answer 8

Survival

Growth

Increase market share

Social and ethical

Increase shareholder value

Build brand loyalty