2.11.1 (HL)—Market structures

Market structures compare how firms face competition.

Start with the number of firms, product similarity, entry barriers and information; these features determine the market model before any diagram is drawn.

Example

A local bakery market has many sellers and differentiated products, while a regulated electricity grid has few suppliers and high entry costs.

Classify the structure from evidence, then predict pricing power, output and efficiency.

A label such as ‘large firm’ does not by itself prove monopoly power; contestability and substitutes still matter.

Structure map: perfect competition—many firms, free entry, homogeneous product; monopoly—single or dominant firm, high entry barriers, no close substitutes; oligopoly—few large firms, high barriers and strategic interdependence; monopolistic competition—many firms, free entry and differentiated products. Classify from the full feature set, not firm size alone.