Pure competition, pure monopoly, monopolistic competition, and oligopoly
Briefly state the basic characteristics of pure competition, pure monopoly, monopolistic competition, and oligopoly. Under which of these market classifications does each of the following most accurately fit? (a) a supermarket in your hometown; (b) the steel industry; (c) a Kansas wheat farm; (d) the commercial bank in which you or your family has an account; (e) the automobile industry. In each case justify your classification.
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Characteristics of Pure competition:
- Number of firms - Very large
- Products - Standardized
- Price - individual firm is a price taker (no control)
- Entry barriers - No
- Non-price competition - No
Characteristics of Pure Monopoly:
- Number of firms - One
- Products - Unique (no close substitute)
- Price - Good control over price (price maker)
- Entry barriers - Yes
- Non-price competition - There is no competition for a pure monopoly
Characteristics of Monopolistic competition:
- Number of firms - many (less than pure competition)
- Products - Differentiated products
- Price - some control within a price ...