Market structures
| English | Chinese | Pinyin |
|---|---|---|
| market structure | 市场结构 | shì chǎng jié gòu |
| perfect competition | 完全竞争 | wán quán jìng zhēng |
| price-taker | 价格接受者 | jià gé jiē shòu zhě |
| monopoly | 垄断 | lǒng duàn |
| oligopoly | 寡头垄断 | guǎ tóu lǒng duàn |
| monopolistic competition | 垄断竞争 | lǒng duàn jìng zhēng |
| differentiated | 差异化的 | chā yì huà de |
| barriers to entry | 进入壁垒 | jìn rù bì lěi |
A spectrum of competition
- At one extreme, thousands of identical wheat farmers, none able to budge the price. At the other, a single water company. Most industries sit between.
- Market structure 市场结构 — how many firms, how much power — shapes price, output and profit.
In perfect competition, each firm is a:
With many firms and an identical product, each must accept the market price.
A firm that must accept the market price, unable to influence it, is a price-______.
Perfectly competitive firms are price-takers.
Perfect competition 完全竞争
- Perfect competition: many small firms, an identical product, free entry, perfect information.
- Each firm is a price-taker 价格接受者: it faces a horizontal demand at the market price (P = MR = AR).
In long-run perfect competition the price line is tangent to AC at its minimum — only normal profit.
Costs and the firm
Average cost is U-shaped; marginal cost cuts it at the minimum. Different market structures price relative to these curves.
Match each market structure to its key feature.
Number of firms and product differentiation define the structure.
The other structures
- Monopoly 垄断: one dominant firm, high barriers, price-maker (supernormal profit possible).
- Oligopoly 寡头垄断: a few large firms, interdependent (they watch each other), often non-price competition.
- Monopolistic competition 垄断竞争: many firms, differentiated 差异化的 products (branding) — normal profit in the long run.
Market structures form a spectrum, from perfect competition through to monopoly
In long-run perfect competition, firms earn only normal profit.
Free entry competes away any supernormal profit until P = AC at its minimum.
Which is a barrier to entry that protects market power?
Patents (and scale, brands, high start-up costs) keep rivals out.
Barriers to entry 进入壁垒
- What protects market power: economies of scale, patents, brand loyalty, high start-up costs, control of a resource.
- The higher the barriers, the closer to monopoly — and the more supernormal profit can persist.
Long-run profits depend on entry. Where entry is free (perfect/monopolistic competition), supernormal profit is competed away to normal. Where barriers are high (monopoly), it can persist.
You've got it
- perfect competition: many firms, identical product, price-takers → normal profit long-run
- monopoly (one firm), oligopoly (few, interdependent), monopolistic competition (many, differentiated)
- barriers to entry (scale, patents, brands) let supernormal profit persist