1. Market Structures

2. Standard SSEM14
The student will explain the organization and role of business and analyze the four types of market structures in the U.S. economy.
a. Compare and contrast three forms of business organization—sole proprietorship, partnership, and corporation.
b. Explain the role of profit as an incentive for entrepreneurs.
c. Identify the basic characteristics of monopoly, oligopoly, monopolistic competition, and pure competition.

4. When you think of market structures think……SHOPPing!

5. Shopping
Think of the environment that you shop in: 1. Are many choices? 2. What are prices like? If they are high, why? 3. Can you find similar products? Is there only one product choice? 4. Do the producers try to gain your attention by using unique labeling, advertisements, Etc?

6. Vocab to know…
Market power – ability to increase prices and people still buy it
Barriers to entry – how difficult it is to enter the industry

7. Market Structure Features of a Market. Such as:
Ease of entry into the market
Can a new producer easily enter the market?
Number of buyers/sellers
Forms of competition
Ex. advertising

8. Perfect Competition
This market structure is not real. It is guided strictly by the laws of supply and demand.
It is a theory that economist created to show what a true competitive market would look
look like. Ranked #1 in competition.

9. Perfect Competition
1. Commodities (ID products) – only way to compete is with prices
2. Easy entry/exit
Low barriers to entry
3. Many buyers and sellers – no monopolies can form
4. Consumers are well informed – we know what we are getting
5. No price control – no market power, all products alike so you can only compete with price
Example: agricultural products
Name your own example

10. Monopolistic Competition
This is a REAL market structure. You shop in it regularly.
It is based on differentiating your products to increase its uniqueness.
Uniqueness= higher price that you can charge!

11. Monopolistic Competition
1.Similar products
Differentiate
So similar you can substitute
2.Easy entry/exit
3.Many buyers and sellers
4.Consumers are well informed
5.Some price control – some market power
Since the products are differentiated, you can charge a little more because of its uniqueness.
Example: cheeseburger fast food, shampoo

12. Can you name to product the slogan is representing?
Just do it
Push through the pain
Because I’m worth it
Like a good neighbor
When you care enough to send the very best
Be all that you can be
Melts in your mouth, not your hands
Turning dreams into reality
I don’t want to grow up….
That was easy

13. answers Nike Tylenol L’Oreal State Farm Insurance Hallmark US army
MM’s
Citibank
Toys R Us
Staples

14. Name that logo….

15. Logo
Levis Nestle HP Dreamworks Pantene Monster Hotwheels Lay’s

16. Watch theses
m34 PPw How did they try to differentiate? Do you think their strategy will work?

17. Review Why does Perfect competition have identical products?
Give an example of how a candy bar can be differentiated.
How did Monopolistic competition get its name?
Which market structure would you rather shop in?

18. Basketball Shoe You must have:
5 nonprice factors drawn and marked on your shoe
Name your shoe
Create a slogan
Create a logo
All of these must been on the front of your shoe. We will vote on these in class! The winner gets candy and a free homework pass!!

19. Monopolies
The game monopoly and the economic term monopoly have something in common. What do you think it is?

20. Monopoly
A monopoly is when one producer sells a good or service. Since he is the sole provider, he can charge whatever price he/she wants.

21. Monopoly 3 characteristics Sole producer (high market power)
No close substitutes
High barriers to entry

22. 4 Types of monopoly
Natural Monopoly – single producer that produces most efficiently b/c of the economies of scale.
Example – power companies
Geographic Monopoly – a monopoly due to location.
Example – Disney World, the movie theater, Six Flags

23. 4 Types of Monopolies
Technological Monopoly – a producer is the only one with a certain technology or way of producing.
Ex. Patent and copyright.
Ex. Polaroid Camera
Government Monopoly – the government is the sole producer of a product.
Example – water company, 1st class mail

24. Review monopolies
Legal barriers in place to prohibit a company from forming to compete against the government
When competition is not practical
When you dominate an area because having another competitor isn’t financially profitable
Having legal protection

25. Oligopoly
A market structure where there are only 3-5 producers that produce the good or service

26. Oligopoly Characteristics 3-5 producers Differentiated products
High barriers to entry and high market power
Interdependent
Example – cereal industry
Kelloog, Post, and General Mills
American Cars – GM, Ford, Chrysler/Dodge

27. Oligopoly Oligopolies compete legally with price wars
Differentiation of products

28. Oligopoly Illegal Oligopolies Illegal Oligopolies
Cartel – openly announce they are a cartel. They TELL they are a cartel. They openly tell they are an Oligopoly that acts as one!
Cartels openly set prices and production
Ex. OPEC
Collusion – secretly set prices and production.
Both are illegal in the US because they set prices.
Illegal Oligopolies
Cartel – openly announce they are a cartel. They TELL they are a cartel. They openly tell they are an Oligopoly that acts as one!
Cartels openly set prices and production
Ex. OPEC
Collusion – secretly set prices and production.
Both are illegal in the US because they set prices.

29. Review oligopoly
Assuming both are allowed in the US from a consumer point of view, how could a cartel (or collusion) benefit a consumer?
How is an Oligopoly similar to a monopoly?
How is an Oligopoly similar to monopolistic competition?
Could an oligopoly form in a perfectly competitive market? Why?

30. Review - answer with a partner
What is an advantage of buying a product from a monopoly? Disadvantage?
Which of the four types of monopoly has economies of scale? Why?
Name one way PC and MC are alike? Different?
Why are cartels/collusions bad for consumers?
Explain barriers to entry and market power with only a three word phrase. (3 word phrase for each)
Why is Perfect Competition the most competitive market structure of all four?

31. Antitrust Acts
If the government didn’t step in to regulate markets, do you think problems would arise?
YES – that is why we have antitrust acts.

32. Antitrust Acts
Antitrust acts were created to prevent big businesses from dominating a market and acting like a monopoly or trust.
A trust is a group of companies that act like a monopoly. This is bad because it sets prices too high which is unfair to the consumer.
Deregulation – reduce government regulation in markets. A reduction in government control.

33. 3 Antitrust Acts to know Interstate Commerce Act – 1887
Regulated trade and did not allow price setting or price discrimination.
Sherman Antitrust Act 1890 – prohibits any agreements, contracts, or conspiracies that would restrain trade – too vague – (1914)Clayton antitrust act strengthened the wording of Sherman. Clayton also legalized strikes and boycotts against companies.
Federal Trade commission act 1914 – created the Federal Trade Commission (FTC) to investigate allegations of unfair methods of competition. It also approves of any mergers.

34. Writing assignment
Write a paragraph about which of the three acts you consider to be the most important to our market based economic system.
Include
The name of the act and what it does (define)
Two reasons it was created
Three reasons you chose it over the others
It must be a minimum of 6 sentences
Use correct grammar and sentence structure.

35. Test prep
Review previous learned material. Such as: Factors of production, circular flow, production possibilities curve, economic systems, supply and demand, types of business, etc.
Take the practice test available on my website under the practice test questions heading.
Review current material. Maybe explain all four market structures to your parents and see if they can pass my practice test after hearing your lesson!! 