Market structure
9 flashcards to master Market structure
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Define 'market structure' in economics.
Market structure refers to the characteristics of a market, including the number and size of firms, the degree of product differentiation, and the ease of entry and exit. It affects firms' behavior and market outcomes like price and output.
What are the key characteristics of perfect competition?
Perfect competition features many small firms, identical products, free entry and exit, and perfect information. In this market structure, firms are price takers, meaning they have no power to influence market price.
Explain 'barrier to entry' and give an example.
A barrier to entry is any obstacle that makes it difficult for new firms to enter a market. Examples include high start-up costs, patents, strong brand loyalty, and government regulations.
What is a monopoly and what is its main characteristic?
A monopoly is a market structure with only one firm dominating the market. The main characteristic is significant market power, allowing the monopolist to be a price maker and control supply.
Describe an oligopoly and its common features.
An oligopoly is a market structure with a few dominant firms. Common features include high barriers to entry, interdependence of firms (actions of one firm affect others), and potential for collusion or competition.
How does monopolistic competition differ from perfect competition?
Monopolistic competition differs from perfect competition due to product differentiation. Firms sell similar but not identical products and have some control over price, unlike price takers in perfect competition.
What does it mean for a firm to be a 'price taker'?
A price taker is a firm that must accept the market price for its product because it is too small to influence it. This is typical in perfectly competitive markets where many firms sell identical products.
Explain the concept of 'market power'.
Market power is the ability of a firm to influence the market price of a good or service. Firms with significant market power can raise prices above competitive levels without losing all their customers.
What are the implications of high barriers to entry for existing firms in a market?
High barriers to entry protect existing firms from competition, allowing them to maintain higher prices and profits. This reduces consumer choice and can lead to less innovation.
Key Questions: Market structure
Define 'market structure' in economics.
Market structure refers to the characteristics of a market, including the number and size of firms, the degree of product differentiation, and the ease of entry and exit. It affects firms' behavior and market outcomes like price and output.
Explain 'barrier to entry' and give an example.
A barrier to entry is any obstacle that makes it difficult for new firms to enter a market. Examples include high start-up costs, patents, strong brand loyalty, and government regulations.
What is a monopoly and what is its main characteristic?
A monopoly is a market structure with only one firm dominating the market. The main characteristic is significant market power, allowing the monopolist to be a price maker and control supply.
Describe an oligopoly and its common features.
An oligopoly is a market structure with a few dominant firms. Common features include high barriers to entry, interdependence of firms (actions of one firm affect others), and potential for collusion or competition.
What does it mean for a firm to be a 'price taker'?
A price taker is a firm that must accept the market price for its product because it is too small to influence it. This is typical in perfectly competitive markets where many firms sell identical products.
About Market structure (3.8)
These 9 flashcards cover everything you need to know about Market structure for your Cambridge IGCSE Economics (0455) exam. Each card is designed based on the official syllabus requirements.
What You'll Learn
- 6 Definitions - Key terms and their precise meanings that examiners expect
- 2 Key Concepts - Core ideas and principles from the 0455 syllabus
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After mastering Market structure, explore these related topics:
- 3.7 Firms' costs, revenue and objectives - 10 flashcards
- 4.1 Government role in economy - 9 flashcards
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