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Perfectly Competitive Oligopoly Monopolistic Competition Monopoly Contestable
A market where one firm
dominates and sells a product with
A market where a few large firms A common market where firms no close substitute. By government
A market where there is many dominate and account for have many competitors who sell definition they have a 25% market A market with no barriers to entry
Definition buyers and sellers practically the whole market. slightly different products share. and no sunk costs.
No barriers to entry
Barriers to entry No sunk costs
Many buyers and sellers Supernormal profits No barriers to entry Short run profit maximisers
Homogeneous goods Sticky prices Short run profit maximiser High barriers to entry Normal profits
Perfect Knowledge Homogeneous products Nonhomogeneous products One firm Perfect knowledge
Conditions Freedom of entry and exit Interdependent Many firms High sunk costs One or many firms
A monopoly takes over a perfectly
If a firm increases prices, then there competitive firm and produces a
will be a decrease in demand. If lower quantity at a higher price,
Aim to profit maximise where p=mc they decrease prices there will be a Supernormal profits therefore earning supernormal If supernormal l profits are earned
and will therefore make small are made due to then other firms will enter and
supernormal profits due to an the low costs of drive profits down to normal.
increase in price and demand. production.
increase in demand but will cause a
Short run diagram price war.
Due to freedom of entry and exit The lack of significant barriers will
firms will join to seek abnormal ensure that only normal profits are
profits and cause a shift in supply. being made.
This will drive profits to normal.
Long run diagram SAME AS ABOVE SAME AS ABOVE SAME AS ABOVE
Does not product at lowest
Allocative In the long run atc
Does not produce where
Productive In long run and short run p=mc
Dynamic In short run Makes supernormal profits Makes supernormal profits Does Not earn supernormal
Unrealistic Acts like a contestable Exploits consumers by Outcome like competitive
Usefulness Maximum consumer surplus Low consumer choice More choice for consumers charging high prices More choice
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Maximum choice Cartellike behaviour reduces Not technically efficient Less consumer surplus Increased consumer welfare
No monopoly power competition Xinefficiency Unrealistic
Don't always act rationally Certainty of prices Less choice Firms may bundle products
Cost savings due to EOS…read more