reaction paper ( film viewing )

v     Market Structure –

Interconnected characteristics of a market, such as the number and relative strength of buyers and sellers and degree of collusion among them, level and forms of competition, extent of product differentiation, and ease of entry into and exit from the market

4 basic types of Market structure:

Ø      Perfect Competition –

A market structure in which:

1. All firms sell an identical product.
2. All firms are price takers.
3. All firms have a relatively small market share.
4. Buyers know the nature of the product being sold and the prices
charged by each firm.
5. The industry is characterized by freedom of entry and exit.

Ø      Monopoly -

A monopoly is a market structure in which a single supplier produces and sells the product. If there is a single seller in a certain industry and there are no close substitutes for the goods being produced, then the market structure is that of a "pure monopoly".

Ø      Monopolistic Competition –

There are many sellers in an industry and/or there exist many close substitutes for the goods being produced, but nevertheless firms retain some market power.

Ø      Oligopoly –

A particular market is controlled by a small group of firms. It is much like a monopoly, in which only one company exerts control over most of a market. In an oligopoly, there are at least two firms controlling the market.

Characteristic	Perfect Competition	Oligopoly	Monopoly
Number of firms	Many	Few	One
Type of product	Homogenous	Differentiated	Limited
Barriers to entry	None	High	High
Pricing	Price taker	Price maker	Price maker
Profit maximization	--------	Not always	Usually, but not always
Economic efficiency	High	Low	Low
Innovative behavior	Weak	Very Strong	Potentially strong

• Market structure is important because it affects market outcomes through its impact on the motivations, opportunities and decisions of economic factors participating in the market.