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Market Structures - Coggle Diagram
Market Structures
Oligopoly
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Overt (Open) Collusion
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in order to collude, producers need some control over the market supply and have strong price making power
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Diagram
Kinked MR line as AR goes from elastic, pass the price war price and onto inelastic
Perfect competition
- no supernormal profit in long run
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- no entry or exit barriers
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- Everyone has perfect knowledge
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3.4.1 Efficiency
Allocative efficiency
Where AR = MC, or where the price is the same as the cost to produce the next one. No supernormal profit made here
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Dynamic efficiency
Where the firm reinvests profits into R&D. In the long run it can only happen in oligopolies and monopolies due to the possibility of supernormal profit
X-efficiency
Where the firm cuts out all waste. Is possible in all market structures but much more likely in perfect competition and monopolistic competition due to the competition
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