iiie section a economics notes perfect competition
DESCRIPTION
IIIE SECTION A ECONOMICS NOTESTRANSCRIPT
Perfect Competition
Monopoly Monopolistic Competition
Oligopoly
Infinite buyers and sellers who are willing to supply and buy a product at a ceratin price.
Single seller There are many producers and many consumers in the market, and no business has total control over the market price
An oligopoly maximizes profits by producing where marginal revenue equals marginal costs
Zero entry and exit barriers – Easy to enter or exit the market
High Barriers to Entry
There are few barriers to entry and exit. Entry and exit:
Barriers to entry are high
Perfect factor mobility Price Discrimination
Consumers perceive that there are non-price differences among the competitors' products.
Oligopolies are price setters rather than price takers
Perfect information Price Maker Producers have a degree of control over price
"Few" – a "handful" of sellers.[3] There are so few firms that the actions of one firm can influence the actions of the other firms
Zero transaction costs Oligopolies can retain long run abnormal profits. High barriers of entry prevent sideline firms from entering market to capture excess profits
Profit maximization Profit Maximizer
Homogenous products Product may be homogeneous (steel) or differentiated
Non-increasing returns to scale
The distinctive feature of an oligopoly is interdependence
Property rights Non-Price Competition