ECON 101 Chapter Notes - Chapter 9: Market Power, Perfect Competition, Takers
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ECON 101 Full Course Notes
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Market structure refers to all the features that may affect the behaviour and performance of the firms in a market. Firms have market power when they can influence the price of their product. A market is said to have competitive structure when its firms have little or no market power. The more market power the firms have, the less competitive is the market structure. The extreme form of competitive market structure occurs when each firm has zero market power. Perfectly competitive market structure or more simply, a perfectly competitive market: no need for individual firms to compete actively with one another because none has any power over the market. Competitive behaviour refers to the degree to which individual firms actively vie with one another for business. A firm decides how much output to produce in order to maximize its profits, it needs to know the demand for its product and also its costs of production.