Forms of Market

Market structure describes the competitive environment in which firms operate. The main forms are Perfect Competition, Monopoly, Oligopoly, and Monopolistic Competition. Perfect Competition features a large number of buyers and sellers, a homogeneous product, free entry and exit, and perfect knowledge; firms are price takers. Monopoly is the opposite, with a single seller, a unique product with no close substitutes, and high barriers to entry; the firm is a price maker. Oligopoly is characterized by a few dominant firms whose decisions are interdependent, often leading to strategic behavior like price wars or collusion. Monopolistic Competition involves many firms selling differentiated products, leading to competition on factors like branding and quality, not just price.