ECN 102 Lecture Notes - Lecture 22: Competitive Equilibrium, Externality, Public Service Enterprise Group
Document Summary
In a perfectly competitive industry, perfect competitors take the price at which they can sell their output as given. Monopolists know that their actions affect market prices and take that effect into account when deciding how much to produce. In order to develop models and make predictions about markets and how producers will behave in them, economists have developed four principal models of market structure: Perfect competition: many producers sell identical product (industry of tomatoes) Monopoly: a single producer sells a single, undifferentiated product (diamonds) Oligopoly: a few producers sell products that may be either identical or differentiated. Monopolistic competition: many producers each sell a differentiated product (producers of economic textbooks) This system of market structures is based on two dimensions: the number of producers in the market (one, few, or many, whether the goods offered are identical or differentiated. Differentiated goods: goods that are different but considered somewhat substitutable by consumers.