Market Structure

Market structure can be broken down into four distinct categories: perfectcompetition, monopolistic competition, oligopoly, and monopoly.

Perfect competition: the most competitive environment.

Profits are driven to the required rate of return paid by the entrepreneur to borrow capital from investors (normal profit or rental cost of capital).

Monopolistic competition is also highly competitive, a form of imperfect competition.

A notably large number of firms + product differentiation.

The oligopoly market structure is based on a relatively small number of firms supplying the market.

Each firm must consider what retaliatory strategies the other firms will pursue when prices and production levels change.

Monopoly: the least competitive market structure. In pure monopoly markets, there are no other good substitutes for the given product or service. There is a single seller, which, if allowed to operate without constraint, exercises considerable power over pricing and output decisions.