Chapter 6 - Chapter 6 Competition 1. Market Structure The...

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1 Chapter 6 Competition 1. Market Structure The number and relative size of firms in an industry. 2. Competitive Firms A perfectly competitive firm is one without market power. o Market power is the ability to alter the market price of a good or service. It is not able to alter the market price of the good it produces. . 3. Monopoly A monopoly firm is one that produces the entire market supply of a particular good or service. 4. Imperfect Competition Imperfect competition is between the extremes of monopoly and perfect competition. Not on company size only, depends on # of firm producing the identical or similar products In duopoly only two firms supply a particular product. In oligopoly a few large firms supply all or most of a particular product; Game consoles In monopolistic competition: many firms supply essentially the same product but each has brand loyalty. Brand Name Pharmaceutical Companies, gas stations, personal computer manufacturers
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2 5. Perfect Competition A perfectly competitive firm is one whose output is so small in relation to market volume that its output decisions have no perceptible impact on price. Independent Pharmacies A perfectly competitive firm is a price taker . Individual firms output decisions do not affect the market price.
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Chapter 6 - Chapter 6 Competition 1. Market Structure The...

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