Market Structure and Competition

The number of buyers and sellers in a market determines the degree of competition and the market structure.

In a perfectly competitive market, price is determined by the interaction of supply and demand, not by any individual firm.

A monopoly is a market structure in which there is only one seller of a particular good or service.

In an oligopoly, firms are interdependent because their decisions affect each other's profits.

Monopolistic competition is characterized by product differentiation, which means that firms sell slightly different versions of the same product.

Advertising is not a barrier to entry because it is a cost that any firm can incur.

The main goal of antitrust laws is to promote competition in order to protect consumers and ensure efficient markets.

The HHI is used to measure market concentration, which is the degree to which a market is controlled by a small number of firms.

Price discrimination is most likely to occur in a monopoly because the monopolist has market power and can charge different prices to different consumers.

Market failure can be caused by externalities, public goods, information asymmetry, or a combination of these factors.

The government plays a role in regulating markets to promote competition, protect consumers, and correct market failures.

Electricity distribution is an example of a natural monopoly because it is characterized by high fixed costs and low marginal costs.

Cartels are formed by firms in the same industry to fix prices, while trusts are formed by firms in different industries to reduce costs.

The main goal of a predatory pricing strategy is to drive competitors out of the market by selling below cost in order to gain market share.

Horizontal mergers are between firms in the same industry, while vertical mergers are between firms in different industries.