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Subject 1. Characteristics of Different Market Structures PDF Download
A financial analyst must understand the characteristics of market structures to better forecast a firm's future profit stream.

We focus on those characteristics that affect the nature of competition and pricing. They are:

  • The number of firms (including the scale and extent of foreign competition).
  • The extent of product differentiation (which affects cross-price elasticity of demand).
  • The pricing power of seller(s). Can a firm influence the market price?
  • Barriers to entry. Exit costs should also be considered.
  • Non-price competition such as product differentiation.

The characteristics of each market structure will be discussed in subsequent subjects of this reading.

Learning Outcome Statements

a. describe characteristics of perfect competition, monopolistic competition, oligopoly, and pure monopoly;

CFA® 2021 Level I Curriculum, 2021, Volume 2, Reading 13

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