Question

Most common form of market structure in india

Answer 1

structure

Types of market structure

Perfect competition – Many firms, freedom of entry, homogeneous product, normal profit.Monopoly – One firm dominates the market, barriers to entry, possibly supernormal profit.Monopoly diagramOligopoly – An industry dominated by a few firms, e.g. 5 firm concentration ratio of > 50%. Interdependence of firmsOligopoly diagramCollusive behaviour – firms seek to form agreement to increase prices.Monopolistic competition – Freedom of entry and exit, but firms have differentiated products. Likelihood of normal profits in the long term.Contestable markets – An industry with freedom of entry and exit, low sunk costs. The theory of contestability suggests the number of firms is not so important, but the threat of competition.