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Competition and Market Structures How well do you remember the four market structures? Write them out with two example. Go Back Over Your Notes!!

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Presentation on theme: "Competition and Market Structures How well do you remember the four market structures? Write them out with two example. Go Back Over Your Notes!!"— Presentation transcript:

1 Competition and Market Structures How well do you remember the four market structures? Write them out with two example. Go Back Over Your Notes!!

2 What is a Market Structure? The nature and degree of competition among firms in the same industry The nature and degree of competition among firms in the same industry We classify 4 Market Structures by asking questions like: We classify 4 Market Structures by asking questions like:

3 We classify Market Structures by asking: 1. How much control over price does each firm have? 2. How many firms are competing in the market? 3. How large/what size are each of the firms? 4. What are the characteristics of the products in each market? 5. How easy is it for new firms to enter the market?

4 Market Structures Perfect Competition Perfect Competition Monopolistic Competition Monopolistic Competition Oligopoly Oligopoly Monopoly Monopoly

5 MONOPOLY Warm Up: Why did the U.S. govt make monopolies illegal??

6 MARKET STRUCTURES:

7 Perfect Competition Meets 5 Conditions: 1. Large number of buyers and sellers 2. Buyers and sellers deal in identical products 3. Buyers and sellers act independently 4. Buyers and sellers are well-informed 5. Buyers and sellers are free to enter into, conduct, or get out of business

8 Imperfect Competition- lacks 1 or more of the 5 conditions 1. Monopolistic Competition 2. Oligopoly 3. Monopoly

9 Monopolistic Competition Has every condition except identical products! These Firms can monopolize a small part of the market by: 1. Product Differentiation – make their product seem special through ads 2. Non-price Competition - use of advertisements, giveaways, promotions to get your business

10 Oligopoly Where few very large sellers dominate the industry Any firm within this market structure can cause a change in output, sales, or prices A few control 2/3s of the industry

11 Must use Interdependent Behavior Must use Interdependent Behavior Collusion: Collusion: A formal agreement to set prices or limit output, acting as one company.A formal agreement to set prices or limit output, acting as one company. Price Wars: Price Wars: When one firm lowers prices other firms will follow in a series of price cuts that result in unusually low pricesWhen one firm lowers prices other firms will follow in a series of price cuts that result in unusually low prices

12 Monopoly Market Structure with only 1 seller of a particular product The federal government has outlawed monopolies for over 100 years. Trustbusting T.R. and the Sherman Anti- Trust Act started it off!

13 Natural Monopoly -A market situation where costs of production are minimized by having a single firm produce the product What are the other natural monopolies in Western New York?

14 Geographic Monopoly A monopoly based on absence of other sellers LUCK OF LOCATION!!! Example: Thruway gas stations!!

15 Technological Monopoly Based on the ownership of a method of production, scientific advance, method or process Patents - granted by government, exclusive right to manufacture, use, or sell any new and useful Invention Copyrights - given to art or literary work and is exclusive right of artist to publish, sell, or reproduce for their lifetime plus 70 years

16 Government Monopoly Government owns and operates a monopoly at National, State and Local levels What other services does govt provide us that are paid for with our taxes?

17 HOMEWORK HOMEWORK Grab your textbook and you have the remainder of the period to work on this assignment. It will be collected for a grade tomorrow!! Grab your textbook and you have the remainder of the period to work on this assignment. It will be collected for a grade tomorrow!!

18 Top Ten Most Common Words WRITTEN in the U.S. 10. For 9. It 8. Was 7. Is 6. To 5. In 4. A 3. And 2. Of 1. The

19 Its your time to shine with design ! Design advertisement posters for the market structures your group has been assigned. Your posters must have the following… *A Slogan *Picture of the Product or Service *Company Name Please: DO NOT write what Market Structure it is!

20 Pop Quiz Time!! 1. Name three products that would fall in the monopolistic competition market structure. 2. What makes an oligopoly, an oligopoly? 3. What are two different industries that fall in oligopoly? 4. Name three legal monopolies.

21 Pop Quiz 5. What is product differentiation? 6. What is collusion? 7. How do price wars help consumers? 8. What are three perfect competitive firms? 9. What makes perfect competition perfect? 10. Why are most monopolies illegal?

22 Answers: 1. 1 pt. each: shampoo, cereal, soap, hair spray, soup, computer games pt.: a few firms; 1 pt.: 2/3s industry pt. each: soda, gelatin, fast food, gas manufacture, local grocery markets, etc pt. each: Natl Fuel, Natl Grid, Books, Songs, Scripts, ©

23 Answers: 5. 1 pt.: advertising to make g&s seem unique although not really; make it seem special pt.: When firms work together to limit production or raise prices 7. 1 pt: When firms compete and keep lowering prices!!

24 Answers: 8. 1 pt each: any farm products: apple, orange, beef, milk, etc pts: many firms that sell identical products pt: too much power, price gouging, etc.

25 What happens when the market fails?? HOMEWORK: Create a 4 – Square for each of the four market failures


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