The following are the characteristics that determine the market structures:

• Number of buyers and sellers: It refers to the number of firms producing a similar or identical product and the number of buyers in the market.
  • In a perfectly competitive market, there are many buyers and sellers, whereas in a monopoly, there is only one seller.
• Product differentiation: It refers to the extent to which products in a market are identical or differentiated.
  • In a perfectly competitive market, products are identical, whereas in a monopolistically competitive market, products are differentiated to some extent.
• Degree of freedom of entry: It refers to the ease with which new firms can enter the market.
  • In a perfectly competitive market, there are no barriers to entry, whereas in a monopoly, there are high barriers to entry.
  • Barriers to entry and exit are factors that make it difficult or impossible for new firms to enter a market or for existing firms to exit the market. There are different types of barriers to entry and exit, including:
  • Legal barriers: These are barriers that are created by laws or regulations.
    • For example, some industries may require licenses or permits to operate, and obtaining these licenses can be difficult or costly. Patents and copyrights can also create legal barriers by giving a company exclusive rights to produce or sell a certain product or service.
  • Market barriers: These are barriers that are created by the structure of the market itself.
    • For example, in a monopoly, there is only one seller, which makes it difficult for new firms to enter the market. In an oligopoly, there are only a few large firms that dominate the market, making it difficult for smaller firms to compete.
  • Cost barriers: These are barriers that are created by the high costs of entering or exiting a market.
    • For example, the cost of building a new factory or buying expensive equipment can be a barrier to entry. Similarly, the cost of shutting down a factory or selling off equipment can be a barrier to exit.
  • Physical barriers: These are barriers that are created by physical factors, such as geographic location or access to resources.
    • For example, if a market is located in a remote area with poor transportation infrastructure, it may be difficult for new firms to enter the market. Similarly, if a market requires access to specialized resources, such as rare minerals or skilled labor, it may be difficult for new firms to compete.
• Availability of information: It refers to the extent to which buyers and sellers have access to information about market conditions.
  • In a perfectly competitive market, all buyers and sellers have perfect information, whereas in an imperfectly competitive market, information is not perfect.