The shape of demand curves firms face may change from one form of market structure to another. For instance, perfectly competitive oligopoly firms do not face the same demand curves due to various reasons.
There are many dairy farmers in the world and also many Starbucks coffeehouses.
Why does a Starbucks coffeehouse face a downward–sloping demand curve while a dairy farmer has a horizontal demand curve?
B. What other suppliers might face a downward–sloping demand curve?
C. What implications does this have for their advertising budget as compared to suppliers with horizontal demand curves?
Topic 2: Barriers to Entry and Competition
There are a number of factors that influence the nature of firms, including the level of competition they may be involved in or may not be involved in at a given period. Barriers also shape the nature of the various forms of market structures.
How do barriers to entry impact the level of competition in a market?
B. What might happen to the market price as greater barriers to entry come into existence?
C. Not all barriers to entry are created through market conditions. Barriers to entry, such as patents, licenses, or international trade restrictions, may be government imposed. How do government–imposed barriers such as patents impact consumers and suppliers in these markets?