ECON 110 Chapter Notes - Chapter 9: Average Variable Cost, Marginal Revenue, Perfect Competition
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ECON 110 Full Course Notes
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Market structure: all features of a market that affect behaviour and performance of firms in the market. Firms have market power when they can influence the price of their product: the competitiveness of a market is determined by the degree to which individual firms lack market power. A market is said to have a competitive structure when its firms have little or no market power. The more market power firms have, the less competitive the market structure is. A perfectly competitive market occurs when each firm has zero marker power: firms in this market must accept the price set by the forces of market demand and supply. In perfectly competitive markets there is no need for individual firms to compete actively with one another. Competitive behaviour refers to the degree to which individual firms actively compete with one another for business: this occurs when firms have some real power over the market.