However, in practice, very few industries can be described as perfectly competitive.
Because of this it serves as a natural benchmark against which to contrast other market structures. Perfect competition leads to the Pareto-efficient allocation of economic resources. Agriculture comes close to being perfectly competitive.
Perfect competition: An industry structure in which there are many firms, none large enough to influence the industry, producing homogeneous products. Each firm is large enough to influence the industry. Oligopoly: An industry structure in which there are a few firms producing products that range from slightly differentiated to highly differentiated. There are relatively insignificant barriers to entry or exit, and success invites new competitors into the industry. There are close substitutes for the product of any given firm, so competitors have slight control over price. Monopolistic competition: A market structure in which there is a large number of firms, each having a small portion of the market share and slightly differentiated products. Barriers to entry and exit exist, and, in order to ensure profits, a monopoly will attempt to maintain them. Monopoly: An industry structure where a single firm produces a product for which there are no close substitutes. The major types of market structure include the following: Market structure is determined by the number and size distribution of firms in a market, entry conditions, and the extent of product differentiation. Describe degrees of competition in different market structures. Option d is incorrect as the equilibrium quantity is 30 and not 3.\) 
Option c is incorrect as when price equals 2, there will be ED and the Quantity traded will be 20 and not 50. Option a is the incorrect answer as when the price equals 4, a situation of ES (or, Excess Supply) will be created.ES refers to the situation when the QS by the producer is greater than the QD by the consumers. Therefore, the equilibrium price is 3 and the EQ is 30.Īt any price below 3, a situation of ED (or, Excess Demand) will be created.ED refers to the situation when the QD by the consumer is greater than the QS by the producers. The EQ (or, Equilibrium Quantity ) can be obtained by putting the value of price in any of the two equations.
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