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    W7 Topic 5D. Market Structure Summary

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    The document provides an overview of market structure, discussing why firms study it and how different structures like perfect competition, monopoly, monopolistic competition, and oligopoly differ in their characteristics, profit maximization approaches, economic efficiency, and special features.

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    W7 Topic 5D. Market Structure Summary

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    mathisfun.malaysia
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    The document provides an overview of market structure, discussing why firms study it and how different structures like perfect competition, monopoly, monopolistic competition, and oligopoly differ in their characteristics, profit maximization approaches, economic efficiency, and special features.

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    W7 Topic 5D. Market structure summary

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    The document provides an overview of market structure, discussing why firms study it and how different structures like perfect competition, monopoly, monopolistic competition, and oligopoly differ in their characteristics, profit maximization approaches, economic efficiency, and special features.

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    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    4 views2 pages

    W7 Topic 5D. Market Structure Summary

    Uploaded by

    mathisfun.malaysia
    The document provides an overview of market structure, discussing why firms study it and how different structures like perfect competition, monopoly, monopolistic competition, and oligopoly differ in their characteristics, profit maximization approaches, economic efficiency, and special features.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 2

    Market Structure Overview

    Why study market structure?

    Every firm exists to maximize profits.


    PROFITS = TR – TC

    TR = P X Q
    Each firm must set the profit maximizing P and Q.

    1. To set the profit maximizing P and Q, each firm must understand the characteristics of
    the market structure that it is operating in.

    2. Then it can set the profit maximising P and Q.

    3. Is the market structure good for society even though a firm can make profits?

    4. Are there special features in each market structure?

    1. ASSUMPTIONS / CHARACTERISTICS
    - What are the assumptions?
    - Compare the assumptions

    Perfect Monopoly Monopolistic Oligopoly


    Competition Competition
    1 No of firms Many Sole/ only 1 Many Few large
    sellers

    2 Type of product Homogeneous Unique/ Differentiated Homogeneous


    Differentiated
    No substitute

    3 Entry barriers No Yes No Yes

    4 Pricing Price taker Price maker Price maker Price maker

    5 Perfect Information Yes No No No


    2. PROFIT MAXIMISATION
    Price and Quantity decision

    Perfect Monopoly Monopolistic Oligopoly


    Competition Competition
    A Pricing
    1 Demand curve Horizontal Downward Downward Downward
    Perfectly sloping sloping. sloping.
    elastic More elastic Kinked
    than monopoly
    2 Market power Price taker Price maker Price maker Price marker

    3 Price and revenue P=MR P>MR P>MR P>MR

    B Quantity MC =MR MC =MR MC =MR MC=MR


    P = MC

    3. IS THE MARKET STRUCTURE GOOD FOR SOCIETY?

    Perfect Monopoly Monopolistic Oligopoly


    Competition Competition

    1 Allocative efficient Yes. NO NO NO


    P=MC P>MC P>MC P>MC

    2 Productive efficient Yes. No. No. No.


    P=min ATC P>min ATC P>min ATC P>min ATC

    4. SPECIAL FEATURES

    1. PC - SHUTDOWN RULE (P < AVC)

    2. MONOPOLY - ENTRY BARRIERS


    - PRICE DISCRIMINATION

    3. MC - PRODUCT DIFFERENTIATION

    4. OLIGOPOLY - INTER-DEPENDENT RELATIONSHIP


    - COLLABORATION

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