ABSTRACT
This chapter presents economic models of each of the four market structures, giving particular emphasis to implications of these market structures for social welfare, fairness, and public policy. Market power is related to the degree of competition in a market. A general rule of thumb is that the more competitive a market is (i.e., the more sellers present in that market), the less market power is held by any individual seller. From the point of view of an individual business, competition is generally a bad thing—something to be reduced or eliminated. To consumers, competition is generally a good thing. Competition among businesses tends to drive prices down, making goods and services more affordable to consumers. To an economist, competition implies the case in which so many buyers and sellers interact in a market that none are able to exercise significant market power.
