1 page and a half discussing these factors below about the nature of the financial services industry.
Identify whether an industry is best described as perfectly competitive, a monopoly, monopolistically competitive, or an oligopoly.
Number of firms competing in an industry.
Relative size of firms (concentration)
Measures the size distribution of firms within an industry.
• Are there many small firms ?
• Are there only a few large firms ?
Industries differ in regard to the technologies used to produce goods and services.
• Labor-intensive industries,
• Capital-intensive industries.
Within a given industry if the available technology is :
• the same, firms will likely have similar cost structures,
• different, one firm will likely have a cost advantage.
Demand and Market Conditions
• low demand may imply few firms.
• high demand may imply many firms.
Potential for Entry
Optimal decisions by firms in an industry will depend on the ease with which new firms can enter the market.
Several factors can create barriers to entry (or make entry difficult).
• Capital requirements,
• Economies of scale.
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