ECON-2006EG Study Guide - Quiz Guide: Monopoly, Systematic Chaos, Marginal Cost
Document Summary
14. 1 two more market structures: differentiated products refer to goods that are similar but are not perfect substitutes. They contrast with: homogenous products, which refer to goods that are identical, and so are perfect substitutes (e. g. soybeans grown by different farmers). Industries do not only differ in whether or not their products are differentiated or homogeneous, but also in the number of sellers present in the industry. Industries can be distinguished among two dimensions: the number of firms supplying a given product, the degree of product differentiation. These distinctions lead us to two new market structures: oligopoly is the market structure that applies when there are few firms competing. Oligopolies can feature either homogeneous or differentiated products. This means that firms in a monopolistically competitive industry, despite having pricing power, make zero economic profits in the long run. For example, while there are many different brands of soap there are only a few suppliers to these brands.