Flashcards on Microeconomics Core Concepts and Problems
Microeconomics Core Concepts & Problems Explained for Students
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Market Structure
41 cards
Card 1
Question: What defines a market structure in economics?
Answer: A market structure is defined by the number of firms, product differentiation, ease of entry and exit, and how much market power firms have (ability t
Card 2
Question: What are the main types of market structures along the spectrum of competition?
Answer: Perfect competition, monopolistic competition, oligopoly, and monopoly (ordered from most to least competitive).
Card 3
Question: What key feature distinguishes perfect competition from other market structures?
Answer: Many firms selling identical (homogeneous) products with free entry and exit and firms are price takers (no market power).
Card 4
Question: How does product differentiation characterize monopolistic competition?
Answer: Many firms sell products that are differentiated (not perfect substitutes), giving each firm some price-setting power but with low barriers to entry l
Card 5
Question: What are the defining characteristics of a monopoly?
Answer: A single firm supplies the market, faces the market demand curve, has significant market power to set price above marginal cost, and high barriers to
Card 6
Question: What distinguishes an oligopoly from other market structures?
Answer: A few large firms dominate the market, products may be homogeneous or differentiated, and firms' decisions are interdependent (strategic behavior matt
Card 7
Question: Why is firm interdependence important in oligopoly?
Answer: Because each firm's optimal price or output depends on rivals' actions; strategic responses (e.g., price matching or quantity adjustments) affect prof
Card 8
Question: What is market power and how does it vary across structures?
Answer: Market power is a firm's ability to raise price above marginal cost without losing all customers. It is lowest in perfect competition and highest in m
Card 9
Question: How do barriers to entry influence market structure outcomes?
Answer: Higher barriers to entry (legal restrictions, high fixed costs, control of key inputs) reduce competition, sustain positive economic profits, and cont
Card 10
Question: What outcome regarding price and efficiency is typical for monopoly compared with perfect competition?
Answer: Monopoly typically sets higher price and lower quantity than perfect competition, causing allocative inefficiency (price > marginal cost) and deadweig