Chapter 08: Market Structures

Explainer

Here are some of the things you'll learn in this chapter

• we'll describe the main features of each market structure and evaluate the benefits and drawbacks of each
• Graphing and explaining (usings SPECS) the short and long run production position of individual firms in each market
• you'll have to understand why the production position changes from one market structure to another
• calculating and measuring the level of competition in a given market

Core ideas

Market structure is really about competition vs market power. As competition falls, firms gain more ability to influence price/output — which can raise prices, restrict output and reduce consumer welfare.

You’ll use diagrams (AR/MR/MC/AC) to compare outcomes like supernormal profit, normal profit, allocative efficiency (P = MC) and productive efficiency (min AC).

Exam focus

• diagram-heavy: PC vs monopoly comparison, profit rectangles, efficiency labels
• oligopoly: kinked demand + price rigidity, collusion/price leadership/limit pricing
• data skills: calculate an HHI from market shares and evaluate consumer impacts