unit4marketstructureandcompetition

unit4marketstructureandcompetition内容摘要：

and washing powders/laundry detergent  Hair shampoo and toothpaste  Pamp。 G pany ’s Products  Type of market structure influences how a firm behaves:  Pricing  Supply  Barriers to Entry  Efficiency  Competition 42 Competition  Degree of petition in the industry  High levels of petition – Perfect petition  Limited petition – Monopoly  Degrees of petition in between – Monopolistic Competition, Oligopoly  Perfect Competition:  Free entry and exit to industry  Homogenous product – identical so no consumer preference  Large number of buyers and sellers – no individual seller can influence price  Sellers are price takers – have to accept the market price  Perfect information available to buyers and sellers  Examples of perfect petition:  Financial markets: stock exchange, currency markets, bond markets?  Agriculture?  To what extent?  Advantages of Perfect Competition:  High degree of petition helps allocate resources to most efficient use  Price = marginal costs  Normal profit made in the long run  Firms operate at maximum efficiency  Consumers benefit  What happens in a petitive environment?  Firm makes short term abnormal profit  Other firms enter the industry to take advantage of abnormal profit  Supply increases – price falls  Long run – normal profit made  Choice for consumer  Price sufficient for normal profit to be made but no more!  Imperfect or Monopolistic Competition  Many buyers and sellers  Products differentiated  Relatively free entry and exit  Ease of entry means new petition erodes profits – pizza shops  Lots of ing and going  Each firm may have a tiny ‘monopoly’ because of the differentiation of their product  Firm has some control over price  Examples:  restaurants, professions – solicitors, etc.,  building firms – plasterers, plumbers, etc.  Oligopoly – Competition amongst the few  Industry dominated by small number of large firms  Many firms may make up the industry  High barriers to entry  Products could be highly differentiated – branding。