UNIT NINE

MARKET STRUCTURES
AND THEIR KEY CHARACTERISTICS

ESSENTIAL VOCABULARY
1. Differentiate v – to mark or show a difference between or in things – відрізняти (ся),
розрізняти; диференціювати, робити несхожим.
2. Dominate v – to exert controlling influence or power over something – панувати, домінувати,
володарювати. To dominate a market – панувати на ринку. Syn. to rule, to control.
3. Feature n – a distinctive attribute or aspect of something – особливість, характерна риса;
якість, властивість. Syn. a characteristic, a quality.
4. Identical adj – similar in every detail, exactly alike – однаковий, ідентичний, тотожний.
Syn. equal, the same.
5. Intermediary n – a person who acts as a link between people in order to try to bring about an
agreement – посередник.
6. Market n – a meeting together of people for the purpose of trade, by private purchase and sale –
ринок. Competitive market – конкурентний ринок, market condition(s) – кон’юнктура
ринку/стан ринку, market power – ринкова влада. To exit the market – залишити ринок/піти
з ринку.
7. Obstacle n – something in the way that stops progress or makes it difficult - перешкода,
перепона, завада. Obstacles to entry – перешкоди до вступу. Syn. a barrier, an obstruction.
8. Protect v – to provide protection against or compensation for loss, risk, etc. – захищати. Syn. to
safeguard.
9. Reject v – to refuse to accept – відхиляти, відмовляти(ся). To reject a price – відхилити
ціну. Syn. to refuse, to deny.
10. Restriction n – a limiting condition or measure, esp. a legal one – обмеження.
11. Trade v – to engage in buying and selling for profit – торгувати.
12. Unique adj – existing as the only one or as the sole example – єдиний, єдиний у своєму роді,
унікальний. Syn. single.

TEXT
Market is an actual or nominal place where forces of demand and supply operate, and where buyers
and sellers interact (directly or through intermediaries) to trade goods and services. Market is
created when there is the seller, the buyer, the price, the product and competition, the cornerstone of
the free enterprise system.
In most economic systems consumers and producers exchange their goods and services in many
competitive markets. Economists generally agree that there are four major degrees of competition
resulting in different market structures. Market structure can be defined in terms of* the number
and the power of the buyers and sellers, the nature of the product (product differentiation), barriers
to entry and exit, and availability of information.
The principal types of market structures are perfect competition, monopolistic competition,
oligopoly, and monopoly.
Perfect (or Pure) Competition. The laws of supply and demand operate only under conditions of
perfect competition. Perfect competition is the name given to a market structure characterized by
the following features.
 There are a lot of buyers and sellers purchasing and selling exactly the same commodity. It
means that no one buyer or seller can affect the market price by entering or leaving the market.
They can accept the market price or reject it.
 Identical commodity is offered for sale. It denotes that all units of the commodity are the same
in the minds of buyers and they must be willing to purchase it from the seller who offers this
product at the lowest price.
 Each buyer or seller has perfect knowledge of market prices and quantities meaning that all of
them are completely aware of* the prices and quantities at which transactions are taking place in
the market. This permits buyers to compete with buyers, and sellers with sellers.
 There are no barriers to enter or exit the market. It means that there must be no obstacles to
prevent firms from entering or leaving the particular market at will.
The stock exchanges are good examples of this market structure.

Monopolistic Competition. Perfect competition and perfect competitive markets exist in only a
few businesses and industries. In fact, most businesses work very hard to make their products and
services special or unique. Such a type of market is called monopolistic competition. It is
characterized by:
 a large number of firms producing similar but not identical products;
 product differentiation;
 some restrictions of information about market prices and quantities;
 relatively easy entry for firms.
Sellers do their best to make their goods or services more attractive than the competitors’. The
process of creating uniqueness in products is known as product differentiation. It distinguishes
monopolistic competition from perfect competition. Brand name, color package, location of the
seller, customer service, credit conditions, or the smile of the salesperson can differentiate a
product, even if the products themselves are physically equal. Product differentiation benefits
buyers by providing them with a way to distinguish between competing goods as well as sellers by
enabling them to increase their market power.
Monopolistic competition is found in many industries. Some specific examples include the
manufacture of clothing, household goods, shoes, and furniture.
Oligopoly. An oligopoly is a market dominated by a few large suppliers. Breakfast cereals,
automobile and computer hardware are examples of industries controlled by oligopolies. It is
characterized by:
 A limited number of leading firms producing a particular branded product.
 Interdependence between firms. It suggests that each firm must take into account the possible
reactions of other firms in the market when making pricing and investment decisions.
 Barriers to entry. It denotes that competing firms can enter the markets only if they pay the
patent holders for permission to use the process or find a new method of production not protected
by existing patents.
 Lack of competitive pricing as oligopolists know that if they reduce or increase their prices
the competitors will do the same.
Monopoly. A monopoly is defined as a single firm producing a product, for which there are no
close substitutes. To put it another way, no other firms produce a similar product. Monopolies have
the following qualities:
 A single seller or monopolist who determines supply and has complete control over the market
price.
 No close substitutes. The product sold by a monopoly is different from those offered by other
firms.
 Barriers to entry. Competing firms are unable to enter the market where a monopoly exists.
Imperfect Competition. Perfect competition, with its many buyers and sellers, all of whom have
perfect knowledge of market conditions, rarely exists. Neither does perfect monopoly, wherein
buyers, unable to find substitutes, pay a price selected by the monopolist. Thus, in reality, most of
the nation’s economic activity occurs under conditions of imperfect competition. This market
structure consists of industries and markets that fall in between two extremes of perfect competition
and pure monopoly. Professor Joan Robinson referred to this kind of trade as imperfect competition
in which sellers had more freedom to determine prices than they had under perfect competition, but
less than they had under monopoly.
COMMENTS:
in terms of – з точки зору;
are completely aware of*– цілком обізнані з.

Exercise 1. Read, translate into Ukrainian in written form and learn by heart the definitions of the
following economic terms and concepts.

1. Competition: The rivalry between ______________________________________

suppliers in the same market, usually in ______________________________________
selling at the lowest price or in giving better ______________________________________
quality or generally offering better value for ______________________________________
money. ______________________________________
2. Competitive market: One in which ______________________________________
there is only one price for a given ______________________________________
commodity at any one time; all buyers and ______________________________________
sellers know the market conditions. ______________________________________
______________________________________

3. Imperfect competition: A market in ______________________________________

which there is neither pure perfect ______________________________________
competition nor pure monopoly. ______________________________________
4. Market: Any mechanism that enables ______________________________________
buyers and sellers come to an agreement ______________________________________
about purchase and sale of merchandise. ______________________________________
______________________________________
5. Market structure: The types of ______________________________________
competitive market within which firms ______________________________________
operate. ______________________________________

6. Monopolistic competition: A state of ______________________________________

competition in a market in which many ______________________________________
firms compete, producing similar but ______________________________________
slightly differentiated products. ______________________________________
______________________________________
7. Monopoly: A market in which there is ______________________________________
only one seller. ______________________________________
8. Oligopoly: A term applied to markets ______________________________________
dominated by a few large firms. ______________________________________
______________________________________

9. Perfect (Pure) Competition: A market ______________________________________

for uniform products in which there many
buyers and sellers, no one of which is big
enough to affect the price, and has full
knowledge of market conditions.
______________________________________
______________________________________
______________________________________
______________________________________
______________________________________

10. Product differentiation: A process of ______________________________________

creating uniqueness in a product. ______________________________________
______________________________________

Exercise 2. Give the Ukrainian equivalents for the following.

1. to trade goods and services – _________________________________________
2. four major degrees of competition – ____________________________________
3. characterized by the following features – ________________________________
4. no one buyer or seller – ______________________________________________
5. all units of the commodity – __________________________________________
6. a stock exchange – __________________________________________________
7. a process of creating uniqueness – _____________________________________
8. to increase their market power – _______________________________________
9. а limited number of leading firms – ____________________________________
10. interdependence between firms – ______________________________________
11. not protected by existing patents – _____________________________________
12. no other firms produce – _____________________________________________
13. most of the nation’s economic activity – _________________________________
14. to fall in between the extremes – _______________________________________

Exercise 3. Find the English equivalents for the following words and phrases from the text.
1. Реальне або умовне місце – _________________________________________
2. наріжний камінь системи вільного підприємництва – ___________________
____________________________________________________________________
3. перешкоди для входу та виходу – ____________________________________
4. за умов досконалої конкуренції – ____________________________________
5. погоджуватися з ринковою ціною – __________________________________
6. не повинно бути перешкод – ________________________________________

7. робити свої товари та послуги особливими або унікальними – ____________

____________________________________________________________________

8. відносно легкий вхід для фірм – _____________________________________

9. умови надання кредиту – ___________________________________________

10. предмети домашнього вжитку – ______________________________________

11. виробляючи певну брендову продукцію – _____________________________
____________________________________________________________________
12. платити власнику патенту за дозвіл – _________________________________

13. конкурентне ціноутворення – ________________________________________

14. повністю контролювати ринкову ціну – _______________________________
____________________________________________________________________
15. неспроможні знайти товари-замінники – ______________________________
____________________________________________________________________

Exercise 4. Match the verbs/verbal phrases, prepositions and nouns/noun phrases as they occur
together in the text. Translate the expressions they make into Ukrainian.
 To affect industries and markets
to compete for competing goods
to find of permission
to consist to a new method of production
to distinguish buyers
between
to refer different market structures
in
to pay the market price
with
to result this kind of trade

Exercise 5. Copy out from the texts the sentences containing the following words and word-
combinations and translate these sentences into Ukrainian.
1. is defined in terms of _______________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
____________________________________________________________________________
2. transactions are taking place __________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
____________________
3. must take into account _____________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
____________________
4. the smile of the salesperson __________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________
5. as a single firm ____________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________
6. sold by a monopoly _______________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________
7. neither does perfect monopoly ________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________
8. sellers had more freedom ____________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________

Exercise 7. Choose words and word-combinations that have the same or similar meaning to the
words listed below. More than one is possible.
1. відрізняти, розрізняти (2) ___________________________________________
2. відхилити ціну(3) __________________________________________________
3. впливати (3) ______________________________________________________
4. єдиний (2) ________________________________________________________
5. захищати (3) ______________________________________________________
6. однаковий (3) _____________________________________________________
7. панувати (3) ______________________________________________________
8. перешкода (3) _____________________________________________________
9. погоджуватись (2) _________________________________________________
10. характерна риса (4) ________________________________________________

to refuse a price to safeguard to control to differentiate

 to have an effect on to deny a price a quality to dominate
to cover to influence to accept an obstruction
a feature to rule identical to protect
an obstacle a characteristic unique to agree
single equal to affect the same
to reject a price to distinguish a barrier an attribute

Exercise 8. Translate the words in brackets into English.

Markets are flesh and blood of a capitalist economy, and various degrees of competition …
(приводять до різних ринкових структур).
The concept of market structure deals with issues like how many buyers and sellers …
(знаходяться на ринку), whether they make … (однакові чи унікальні товари), and whether
firms can … (вийти на ринок чи залишити його) at will.
Most markets and industries refer to … (до однієї з чотирьох основних ринкових структур):
perfect (pure) competition, monopolistic competition, oligopoly, and monopoly.
… (за умовами досконалої конкуренції) there are a large number of sellers … (цілком
однакової продукції). All buyers and sellers … (мають повну свободу) to enter and leave the
market, and … (повну інформацію щодо цін та обсягів). … (на ринку існує конкуренція)
between many buyers and sellers and no group of buyers or sellers … (не може впливати на
ціну товару). As a result, whether a person is a buyer or a seller, he or she must … (погодитися з
ринковою ціною або відхилити її).
As in the case of perfect competition, monopolistic competition is characterized by … (великою
кількістю продавців).
A key feature … (монополістичної конкуренції) is that firms … (виробляють схожі, але не
одинакові товари), giving each producer a small degree … (ринкової влади).
In addition to the existence of a large number of firms and … (диференціації продукції), …
(відносна легкий вхід та виходу) is considered … (іншою важливою характеристикою) of a
monopolistic competition.
… (важливою рисою) of an oligopoly is (взаємозалежність обмеженої кількості провідних
компаній).
Oligopolies are characterized … (перешкодами до виходу) and strategic interaction (між
фірмами) within the industry. However, unlike monopolistic competition, if an oligopolistic firm
… (змінює свою ціну або обсяг випуску продукції), it … (впливає на прибуток своїх
конкурентів) in the industry. Thus, an oligopolistic firm always considers its competitors’
response … (приймаючи свої рішення щодо ціноутворення та капіталовкладень).
Monopoly can be considered the opposite to perfect competition. It is a market structure in which
… (є тільки один продавець).
The monopolist … (захищений від конкуренції) by obstacles to entry. This single seller …
(єдиного в своєму роді товару) that have no close substitutes completely … (повністю панує на
монополістичному ринку).
In a monopoly, one firm or organization … (повністю контролює ринкову ціну).

Exercise 9. At least one word or word-combination has been omitted from each of these sentences.
Fill in the blanks from the list of missing words below and translate them into Ukrainian.

1. Product differentiation provides a way for firms within certain industries

___________________________________________. – _______________________
________________________________________________________________________________
________________________________________________________
2. _______________________________ is one of a number of ways to prevent new firms from
entering the market called _______________. – ____________________
________________________________________________________________________________
________________________________________________________________________________
____________________________________________
3. ____________________________ is a market structure that consists of industries or markets
that fall ________________________________ perfect competition and monopoly. –
__________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________
4. If a firm can differentiate its product successfully, it can attract _______________ _________
and increase its profit. – _______________________________________
________________________________________________________________________________
________________________________________________________
5. _____________ and ____________ of firms in a market is the factors determining
____________________________________. – ______________________________
________________________________________________________________________________
________________________________________________________________________________
____________________________________________
6. Sellers in ___________________________________________ have no influence over the price
at which they can sell their products. – _________________________
________________________________________________________________________________
________________________________________________________________________________
____________________________________________
7. There is no competition in _________________. – _________________________
____________________________________________________________________
8. Economists describe a market with many sellers providing similar but not identical products as
_________________________________. – ________________
________________________________________________________________________________
________________________________________________________________________________
____________________________________________
9. Circumstances that make it difficult __________________________ are described as "barriers
to entry". – _________________________________________________
________________________________________________________________________________
________________________________________________________
10.Unlike perfect competition, the sellers under monopolistic competition differentiate
______________________________. – _________________________
________________________________________________________________________________
________________________________________________________________________________
____________________________________________

to enter the market the power competitive product the number

a perfect competitive market to increase their market power
the type of market structure monopolistic competition
in between the extremes the high cost of entry
oligopoly monopoly imperfect competition

Exercise 10. Pair the halves of the sentences. Translate them into Ukrainian.

1. Consumers and producers exchange their a. a single firm producing a product for which
goods and services there are no close substitutes.
2. Oligopoly is a market in which there are b. no single firm controls the market.
3. By the structure of the market economists c. the number and the power of the buyers and
mean sellers.
4. The most important point about perfect d. a small number of large firms that share
competition is that market power.
5. A monopoly may be defined as e. in many competitive markets.
6. Under the conditions of perfect competition f. it is difficult for competing firms to enter
prices are determined by the oligopoly.
7. In monopolistic competition many firms g. a large number of firms producing similar
compete with one another for the same but not identical products and relatively
consumers by easy entry for firms.
8. Product differentiation benefits sellers by h. making potential consumers believe that
providing them a way of their products and services are special or
unique.
9. Monopolistic competition is characterized i. making their products more attractive than
by the competition.
10. As there are no other firms producing a j. a large number of independent buyers and
 similar product sellers of exactly the same products.
11. Because of the high cost of entry k. the forces of supply and demand.
12. Perfect competition is the name given to l. a monopoly has the power to select any
market structure characterized by price that will yield the greatest profit.

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
____________________________________

Exercise 10. Match each term in column A with its definition in column B.
 A B
1. Competition a. A form of competition where sellers can influence buyers by
differences in the quantity or appearance of the goods they produced
2. Competitive b. A situation in a market in which seller faces no competition
market
3. Imperfect c. Distinction between products that fulfill the same purpose but are made
competition by different producers and therefore compete with each other
4. Market d. A market in which a few sellers supply many buyers
5. Market e. A form of competition in which the price of a good is the same
structure throughout the market because buyers and sellers have perfect
knowledge of market conditions
6. Monopolistic f. The rivalry among buyers and among sellers in the purchase and sale of
competition resources and products
7. Monopoly g. One in which the price of a given commodity is at level which results in
the sale of the whole quantity offered
8. Oligopoly h. The institution through which buyers and sellers interact and engage in
exchange
9. Pure i. The way in which a market is organized
competition
10. Product j. A state of competition in a market in
differentiation which buyers and sellers have imperfect knowledge of the market and
more freedom to determine prices

1 2 3 4 5 6 7 8 9 10

Exercise 11. Translate the sentences into English using the active vocabulary.

1. Досконала конкуренція – це ринкова __________________________________________

ситуація, де існує багато незалежних __________________________________________
продавців цілком однакової продукції, __________________________________________
але жоден продавець не може впливати __________________________________________
на ринкову ціну. ____________

2. На ринку досконалої конкуренції __________________________________________

покупці і продавці залежать від сил
пропозиції і попиту, які визначають ціну,
з якою покупці і продавці або повинні
погодитись або залишити ринок.
__________________________________________
__________________________________________
__________________________________________
__________________________________________
__________________________________________

3. Індивідуалізація продукції існує на __________________________________________

ринку, коли кожний виробник продає __________________________________________
виріб, чиї характеристики відрізняють __________________________________________
його від продукції конкурентів. __________________________________________
____________

4. Роблячи свою продукцію трохи __________________________________________

іншою, фірма може привабити більше __________________________________________
клієнтів і захопити економічний ринок. __________________________________________
__________________

5. Однією з причин, чому у деяких __________________________________________

галузях промисловості панують кілька __________________________________________
провідних компаній, є те, що існують __________________________________________
певні перешкоди виходу на __________________________________________
олігополістичний ринок. ____________

6. Індивідуалізація продукція – це __________________________________________

процес створення унікальності продукції, __________________________________________
що дає можливість виробнику змусити __________________________________________
споживачів надати перевагу його __________________________________________
продукції. ____________

7. Фірма називається монополією, якщо __________________________________________

вона є постачальником єдиної в своєму __________________________________________
роді продукції, на яку немає замінників, __________________________________________
але є багато покупців. __________________________________________
____________

8. Фірма, яка монополізує ринок, __________________________________________

контролює постачання продукції і __________________________________________
призначає будь-яку ціну, що може __________________________________________
привести до різкого зростання цін. __________________

Exercise 12. Discuss these statements or express your opinion on them. The following phrases may
be helpful:
 May I stress once again…,
 I might as well add that…,
 I see no point in saying…,
 I'd like to draw your attention to the following…,
 I cannot make up my mind as to…,
 The thing I want to mention is…,
 There is something (quite a lot) in what you say, but…,
1. Under conditions of perfect competition market, all buyers and sellers are completely aware of
the prices and quantities at which transactions are taking place in the market.
2. The product sold by a monopoly is different from those offered by other firms.
3. Imperfect competition is a combination of the key characteristics of perfect competition and
monopoly.

Exercise 13. Answer the following questions.

1. What is a market? 2. When is market created? 3. What is competition? 4. What is a

competitive market? 5. What characteristics define the structure of a market? 6. What are the
principal types of market structures? 7. What is perfect competition? 8. What are the features of
perfect competition? 9. Why can no individual alter the market price? 10. What does an identical
commodity offered for sale denote? 11. Why do sellers compete with sellers and buyers with
buyers? 12. What does the characteristic of perfect competition “no barriers to enter or exit the
market” mean? 13. What is monopolistic competition? 14. What are the key characteristics of
monopolistic competition? 15. What distinguishes monopolistic competition from perfect
competition? 16. What is product differentiation? 17. Why does a firm try to differentiate its
product? 18. How does product differentiation benefit consumers? 19. What is oligopoly? 20. What
are the key characteristics of oligopoly? 21. Why is it difficult for competing firms to enter the
oligopolistic market? 22. Why is competitive pricing ineffective in the oligopolistic market? 23.
How does oligopoly differ from monopolistic competition? 24. What is monopoly? 25. What are
the qualities of monopoly? 26. Do supply and demand affect the market price under monopoly?
Why? 27. What is imperfect competition? 28. What types of market structure does imperfect
competition comprise? 29. How does imperfect competition differ from perfect competition and
monopoly?

Questions for economic reasoning and discussion

1. Is perfect competition fantasy or is it real? Why?
2. Is product differentiation wasteful? Would society be better off (житиме краще) with only one
of each product instead of many variations of the same product?
3. A monopolist can always make a profit because with no competition it can charge any price it
likes. Do you think this statement is true?
4. How are different market structures (perfect competition, monopolistic competition, oligopoly
and monopoly) affected by such factors as the number of the buyers and sellers, product
differentiation, and barriers to entry?