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Unit 7 Lesson 1

The document discusses different types of market structures including perfect competition, monopoly, oligopoly, and monopolistic competition. It defines each structure based on characteristics like the number of firms, product differentiation, and barriers to entry. Examples of each type are also provided along with review questions.

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20 views

Unit 7 Lesson 1

The document discusses different types of market structures including perfect competition, monopoly, oligopoly, and monopolistic competition. It defines each structure based on characteristics like the number of firms, product differentiation, and barriers to entry. Examples of each type are also provided along with review questions.

Uploaded by

imadonti.mca
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© © All Rights Reserved
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Download as PDF, TXT or read online on Scribd
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1st year English / semester 2

Unit 7: the market and its importance in economics

MARKET STRUCTURE
 Market Definition: Basically, when we hear the word market, we think of a place where goods are
being bought and sold. In economics, market is a place where buyers and sellers are exchanging goods
and services with the following considerations such as:
 Types of goods and services being traded;
 The number and size of buyers and sellers in the market;
 The degree to which information can flow freely.

 Market structure: it is determined primarily by three criteria:


1. The number of firms selling in the market;
2. The extent to which the products of different firms in the market are the same or different;
3. The ease with which firms can enter into or exit from the market.
 Types of market structure: based on the three criteria above , economists usually group market
structures into four basic categories:

 Perfect Competition: The main characteristics of the pure competition are:


1. Many sellers: There are many sellers, and each farm is so small relative to the entire market that its
actions will have no effect on the price of its product. Instead, it must accept the going market price,
established by the forces of supply and demand.
2. Standardized product: The products of the various firms in the market are so nearly identical that
buyers do not prefer the product of any one farm over that of any other farm.
3. Easy entry and exit: There are no significant financial, legal, technological, or other barriers to prevent
new firms from entering the market. Firms are free to enter and leave the market at will.
4. No artificial restrictions: There are no wage and price controls or other artificial restrictions on the free
movement of prices and wages up and down

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 Monopoly: is the extreme opposite of pure competition and has the following characteristics:
1. The market consists of a single seller;
2. The seller sells a product for which there are no close substitutes;
3. There are barriers to entry that prevent competitors from entering the market;
4. The seller can control the price of his or her product.
 Oligopoly: Although few industries are controlled by a single firm, main industries in the United States
are dominated by a few giant firms. Such a market structure is known as oligopoly, and it is the market
structure under which most large corporations operate. Oligopoly has the following characteristics:
1. a few sellers;
2. substantial barriers to entry;
3. standardized or differentiated products;
4. substantial non-price competition.
 Monopolistic Competition: is a market structure that is characterized by:
1. many sellers;
2. differentiated products;
3. non-price competition;
4. relatively easy entry and exit. It has similarities to both pure competition and oligopoly.

Monopolistic competition is similar to pure competition in the sense that there are many sellers
and no strong barriers to entry. Firms can enter and leave markets on a regular basis. Unlike pure
competition, however, monopolistic competition is characterized by product differentiation and non-
price competition. The latter involves efforts to persuade consumers to buy a particular product for
reasons other than price. In fact, product differentiation and non-price competition are the most
important characteristics that distinguish monopolistic competition from pure competition.

Activities
Activity 1: choose the correct answer
1- The cellular industry in Algeria (ooredoo, mobilis, djezzy)is an example of which of the following?
a. Monopolistic Competition
b. Monopoly
c. Perfect Competition
d. Oligopoly
2- The food industry is an example of which of the following?
a. Monopolistic Competition
b. Monopoly
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c. Perfect Competition
d. Oligopoly
3- Which of the following is not a type of market structure?
a. Competitive monopoly
b. Oligopoly
c. Perfect competition
d. All of the above are types of market structures.
4- If a firm sells its output on a market that is characterized by many sellers and buyers, a homogeneous
product, unlimited long-run resource mobility, and perfect knowledge, then the firm is a:
a. a monopolist.
b. an oligopolist.
c. a perfect competitor.
d. a monopolistic competitor.
5- If a firm sells its output on a market that is characterized by a single seller and many buyers of a
homogeneous product for which there are no close substitutes and barriers to long-run resource
mobility, then the firm is:
a. a monopolist.
b. an oligopolist.
c. a perfect competitor.
d. a monopolistic competitor.
6- If a firm sells its output on a market that is characterized by many sellers and buyers, a differentiated
product, and unlimited long-run resource mobility, then the firm is
a. a monopolist.
b. an oligopolist.
c. a perfect competitor.
d. a monopolistic competitor.
7- If a firm sells its output on a market that is characterized by few sellers and many buyers and limited
long-run resource mobility, then the firm is
a. a monopolist.
b. an oligopolist.
c. a perfect competitor.
d. a monopolistic competitor.

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Activity 02: Give synonyms, and opposites to these words.
words synonyms words opposites
Standardized Many
Unique Entry
Limitation Differences

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