Pure competition
Firms are considered price takers in a perfectly competitive market. In this market type, numerous small firms sell identical products, and no single firm has the power to influence the market price. Because of the high level of competition and the homogeneity of products, firms must accept the market price determined by supply and demand.
· Two firms in the industry · Strong control over price. · Uses Non price competition to compete · Very strong Barriers to entry
· Two firms in the industry · Strong control over price. · Uses Non price competition to compete · Very strong Barriers to entry Note. a pure dupoly very rarly occurs in real life the more common is two dominate firms who hold majority of the market share.
_Amount of control a firm or a group of firms have over the total market supply _The amount of influence a firm or group of firms have over market price _The freedom new suppliers have to enter the market
Total control, as there is no competition the monopoly vendor can ask any price they wish. That is why monopolies are bad for society and Governments have to intervene in the capitalistic market.
Firms are considered price takers in a perfectly competitive market. In this market type, numerous small firms sell identical products, and no single firm has the power to influence the market price. Because of the high level of competition and the homogeneity of products, firms must accept the market price determined by supply and demand.
· Two firms in the industry · Strong control over price. · Uses Non price competition to compete · Very strong Barriers to entry
· Two firms in the industry · Strong control over price. · Uses Non price competition to compete · Very strong Barriers to entry
· Two firms in the industry · Strong control over price. · Uses Non price competition to compete · Very strong Barriers to entry Note. a pure dupoly very rarly occurs in real life the more common is two dominate firms who hold majority of the market share.
_Amount of control a firm or a group of firms have over the total market supply _The amount of influence a firm or group of firms have over market price _The freedom new suppliers have to enter the market
Total control, as there is no competition the monopoly vendor can ask any price they wish. That is why monopolies are bad for society and Governments have to intervene in the capitalistic market.
Sellers in monopolistic competition have more control over price than those in perfect competition because they offer differentiated products that are not perfect substitutes. This product differentiation allows firms to create brand loyalty and set prices above marginal cost, unlike in perfect competition where products are homogeneous, and firms are price takers. Additionally, the presence of some degree of market power enables monopolistically competitive firms to influence their pricing strategies based on consumer preferences.
-many firms - few artificial barriers to entry - slight control over price - differentiated products
The relationship between the number of firms in a market and their influence over price is inversely proportional. In perfectly competitive markets, a larger number of firms leads to greater competition, which typically drives prices down as firms cannot set prices above market equilibrium. Conversely, in markets with fewer firms or monopolies, firms have more power to influence or set prices, often leading to higher prices for consumers. Thus, as the number of firms increases, their individual influence over pricing diminishes.
They can gain some control over their market by secretly cooperating with one another.
In perfect competition, demand equals marginal revenue because firms in this market structure are price takers, meaning they have no control over the price of their product. As a result, they must sell their goods at the market price, which is also their marginal revenue.
A perfectly competitive market is a market that is classified by many firms, with homogeneous products, since there are so many firms and consumers (buyers and sellers) each is a price-taker, meaning they have no control over what the price is. firms as a result set price to the marginal cost, which is the marginal revenue which is also the wage.. If there are profits in the short run due to differences in capital, (in the short run, capital stock is fixed), ability of firms to produce at different quantities is apparent. However over the long run, firms are able to make all costs variable, meaning they can change their capital and labor stock in order to become more efficient. These changes result in higher efficiency, and an eventual drop in price where p=mr. There are no profits in long run.