Different Market Structures Continued
Economics notes
Different Market Structures Continued
➡️ Increased costs: Physical barriers can lead to increased costs for businesses, as they may need to invest in additional infrastructure or equipment to overcome the barrier.
➡️ Reduced efficiency: Physical barriers can also reduce efficiency, as they can slow down the production process or make it more difficult to access certain resources.
➡️ Reduced customer satisfaction: Physical barriers can also lead to reduced customer satisfaction, as customers may have difficulty accessing products or services due to the barrier.
What are the characteristics of a monopolistic market structure?
A monopolistic market structure is characterized by a single seller who has complete control over the market. The seller has the power to set prices and restrict output. There are no close substitutes for the product, and entry barriers are high. The seller can earn supernormal profits in the long run.
How does an oligopoly market structure affect competition?
An oligopoly market structure is characterized by a few dominant firms who have significant market power. The firms can collude to set prices and restrict output, leading to reduced competition. However, the firms may also engage in non-price competition, such as advertising and product differentiation, to gain a competitive advantage.
What are the advantages and disadvantages of a perfectly competitive market structure?
The advantages of a perfectly competitive market structure include efficient allocation of resources, low prices for consumers, and a level playing field for firms. However, the disadvantages include the potential for firms to earn only normal profits, which may discourage innovation and investment, and the possibility of market failure due to externalities or public goods.