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Market structure describes how a market is organised in terms of the number of firms and the barriers to entry for new firms wishing to join the market.

Perfect competition

At one extreme is perfect competition, where there are very many firms competing. Each firm is so small relative to the whole industry that it has no power to influence price. It is a price taker.


At the other extreme is a monopoly, where there is just one firm in the industry, and hence no competition from within the industry.

Monopolistic competition

In the middle come monopolistic competition, which involves quite a lot of firms competing and where there is freedom for new firms to enter the industry.


Oligopoly involves only a few firms and where entry of new firms is restricted.

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Market structures

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