What are the four types of industry structures? Compare and contrast them with the number of firms in the industry, whether firms produce homogeneous or heterogeneous products, whether there are economic profits in long-run equilibrium, and how frequently the model appears in the real world.

Question

What will be an ideal response?

Answer 1

The four types are perfect competition (many firms, homogeneous products, zero economic profits in long-run equilibrium, rare—or nonexistent—in the real world), monopolistic competition (many firms, heterogeneous products, zero economic profits in long run, very common in the real world), oligopoly (few firms, homogeneous or heterogeneous products, zero or positive economic profits in the long run, very common in the real world), and monopoly (only one firm, differentiated product, positive long-run economic profits, relatively uncommon in the real world, but it depends on the definition of the product and the market).