PERFECT COMPETITION
In perfect competition, this determines the price of goods.
Supply and demand.
A monopoly can set prices because it has no close ___.
Substitutes
What is product differentiation?
A key feature of monopolistic competition where firms sell products with unique features like brand name, quality, or style.
What is an oligopoly?
A market structure where a small number of firms dominate the market.
The market structure with the highest degree of competition.
Perfect competition.
What ensures all products are sold at the same price in a perfectly competitive market?
Identical products.
One reason why monopolists can sustain economic profits in the long run.
Barriers to entry.
One way firms in monopolistic competition differentiate their products without lowering prices.
Advertising or branding.
Why are new firms unlikely to enter an oligopolistic market?
High barriers to entry.
An illegal agreement among firms to set prices or production levels.
Collusion
Three main conditions of a perfectly competitive market.
Many buyers and sellers, identical products, free market entry.
A government-issued right that gives a firm exclusive control over a product for a period of time.
patent
How does product differentiation affect demand elasticity in monopolistic competition?
Reduces elasticity.
The effect of price wars in an oligopoly.
Prices drop below production costs.
The type of monopoly that arises due to high start-up costs or economies of scale.
Natural monopoly
The reason economic profits are zero in the long run for perfect competition.
Lack of barriers to entry.
What happens to price and quantity if a competitor enters a natural monopoly market?
Price and quantity decrease
What happens to profits in the long run as more firms enter a monopolistic competition market?
They decrease to zero.
What is the primary factor leading to interdependence among firms in an oligopoly?
Few sellers dominate the market.
One key difference between monopolistic competition and an oligopoly.
Number of firms
Why do perfectly competitive markets have perfectly elastic demand curves?
Availability of many substitutes.
Why can’t monopolists charge extremely high prices for their products?
Price elasticity of demand limits sales.
Why does marginal revenue always lie below the demand curve in monopolistic competition?
Lowering the price to sell more reduces revenue from previous units.
Why do cartels often fail, even when members agree on prices and output?
Members cheat for higher profits.
What happens to consumer choice as a market shifts from perfect competition to monopoly?
Consumer choice decreases