The Market Structure (30 minutes)... Continued

1. Competitive Market

This is a market structure comprising many buyers & sellers, each selling small proportions and therefore not able to influence the market price. Each firm is a price taker. All firms produce a homogeneous product and therefore there is no product differentiation.There is complete knowledge of all relevant market information.There is free entry and exit since there are minimal barriers to enter and exit.

2. Monopoly Market
   
   In a monopoly situation, there is only one firm producing a specific product in a specific market, there are no close substitutes (no cross elasticity), and no interdependence with other competitors in the relevant market. The demand curve for the firm is the demand curve for the industry, since the firm is the industry. Typically, there are substantial barriers to entry, including absolute cost advantage of the established firms due to large capital requirements as well as scale economies. The product is differentiated for loyalty purposes, and in some cases, there is a legal exclusion of potential competitors through patented technology, trade secrets and natural monopolies