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Chapter 10

Economics 1021 Chapter 10 Notes

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Western University
Economics 1021A/B
Jeannie Gillmore

Chapter 10 Markets and the Competitive Environment  Perfect competition: A market in which there are many firms, each selling an identical product o No restriction on the entry of new firms into the industry (most extreme form of competition) o Firms and buyers are well informed about the price of the products, and therefore do not change easily.  Monopolistic competition: A market in which many firms compete by making similar but slightly different products. o Product differentiation: Making a product slightly different from the product of a competing firm o A firm is the sole producer of the particular version of a good in question.  Oligopoly: A market in which a small number of firms compete. o Products produced by different firms may be identical or similar.  Monopoly: A market in which there is only one firm and it produces a good or service that has no substitute. o The firm is protected by a barrier preventing entry of new firms (most extreme absence of competition). o Usually restricted to a given location.  Measures of concentration: o Four-firm concentration ratio:  The percentage of the value of sales accounted for by the four largest firms in an industry  Lower the concentration, higher the degree of competition.  Almost 0% in
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