Market Structure
Number of Sellers Number of Buyers Barriers to Entry Entry and Exit Activity Homogeneous or Differentiated Product?
Pure Competition Many firms Many buyers None Yes, firms have the freedom to enter and exit Homogeneous product, all goods are perfect substitutes for consumers
Monopolistic Competition Many firms with non-interdependent pricing and quantity decisions Many buyers Very low Yes, firms have the freedom to enter and exit Differentiated products, but close substitutes for consumers so their demand curves are elastic
Oligopoly Few firms with interdependent pricing and quantity decision Unspecified High Difficult entry (often due to economies of scale) Products can be either differentiated or non-differentiated
Pure Monopoly Single seller Unspecified Complete entry blocked A single, homogeneous product with no close substitutes


Market Structure

Short Run

Long Run Profits?
Price Taker or Price Searcher?
Draw the demand curve facing the firm
Pure Competition Available No Price Taker - the firm chooses quantity but takes price from the market Perfectly elastic
Monopolistic Competition Available No Price Searcher Very elastic, but not perfectly elastic because close substitutes exist
Oligopoly Available Available if entry is blocked and the colluding cartel holds together (This is unlikely because cartels tend to fall apart.) Price Searcher Inelastic, to be an effective oligopoly
Pure Monopoly Available Available Price Searcher Inelastic, to be an effective monopoly



Disclaimer: The schedules and procedures in this course are subject to change in the event of extenuating circumstances.
Webpage Last Updated on October 15, 2013