Types of markets
Introduced| English | Meaning |
|---|---|
| competitive markets/kəmˈpetɪtɪv ˈmɑːkɪts/ | Many firms, free entry → low prices, efficiency, choice. |
| free entry/friː ˈentri/ | free entry |
| efficient/ɪˈfɪʃənt/ | Using resources without avoidable waste, or allocating them to maximise the relevant net benefit. |
| monopoly/məˈnɒpəli/ | A market structure in which a single seller supplies a good or service with no close substitutes. |
| barriers to entry/ˈbærɪəz tʊ ˈentri/ | Obstacles that make it difficult for new firms to enter a market. |
| innovate/ˈɪnəveɪt/ | innovate |
| economies of scale/ɪˈkɒnəmiz ɒv skeɪl/ | Falls in average production cost as the scale of output increases. |
One seller or many?
- In a street market, dozens of stalls sell the same fruit, so no one can charge much more than the rest.
- But what if a single firm controls the whole market? The outcome is very different.
Economics case lab
Classify real examples by the economic idea they show.
A competitive market is characterised by:
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Many firms with free entry define a competitive market.
Competitive markets 竞争市场
- Many firms sell similar products, with free entry 自由进入 for new firms.
- Strong competition keeps prices low, choice wide, and forces firms to be efficient 有效率的.
In a competitive market many firms sell similar goods, so each keeps prices low to win customers
A monopoly is protected from competition by:
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Barriers to entry keep rivals out, giving the monopolist market power.
Things that stop new firms entering a market are called barriers to ______.
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Barriers to entry protect a monopoly.
Monopoly 垄断
- A monopoly is a single (or dominant) seller, protected by barriers to entry 进入壁垒.
- With no rivals, it can charge higher prices and may have less reason to innovate 创新.
Markets range from monopoly (one seller) to perfect competition (many)
Compared with monopoly, strong competition tends to give consumers:
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Competition drives prices down and widens choice.
A monopoly can sometimes benefit from economies of scale.
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Its large size may lower average cost and fund research.
Comparing the two
- Competition → lower prices, more choice, efficiency, lower profit.
- Monopoly → higher prices, less choice, but possibly economies of scale 规模经济 and funds for research.
Monopoly isn't always bad. A large monopoly can reap economies of scale and fund big research projects. The worry is high prices and weak incentives when no rival can challenge it.
You've got it
- competitive markets: many firms, free entry → low prices, efficiency, choice
- a monopoly is a dominant seller behind barriers to entry → higher prices
- monopoly can bring economies of scale but risks weak incentives