1. Market Structures and Current Changes
Unit 7 Chapter 7 (Economics Textbook) Chapter 26/ Section 3 (Civics Textbook)
Market Structures and Current Changes

2. What is a market Structure?
These are ways the economy of a country is run through businesses, government control, competition and prices.
There are 4 specific market structures and more than 1 market structure can exist in a country.
Perfect competition
Monopolies
Oligopolies
Monopolistic Competition

3. Perfect Competition 4 conditions
Many buyers and sellers participate & accept price.
Sellers offer same/ similar product.
Buyers & sellers are well informed about product.
Sellers are able to easily & freely enter and exist market.

4. Perfect Competition Characteristics:
Allows many businesses to produce the same or similar products
Has no influence on price (equal), because produce at low levels.
Consumer does not care where they get the commodity from.
Buy based on best deal or lower price.
Provides buyer with full information about a product & price.

5. Perfect Competition Characteristics:
Allowed to enter business when there is money to be made, and then leave when money decreases.
More business, brings more competition and therefore lower prices.
Barriers of Entry do not exist because then it would cause and imperfect competition.
Common barriers: skilled/ experienced personnel, technology & start-up cost

6. Perfect Competition Characteristics:
Efficient
Competition keeps prices & production low.
Prices represent the opportunity cost of each product.

7. Monopoly Characteristics:
Allows only 1 seller of a product with multiple buyers.
Exist because of barriers of entry have formed
Causes specific problems, therefore is illegal in the USA.
Takes advantage of market
Charges high prices

8. Monopoly Characteristics:
Set prices as high as consumer will pay.
Contribute to price discrimination, to better their sales & profits
Do this through market power
Found everywhere, except in perfect competitions markets.
Use is legal, but businesses are just know to use to drive out competition.

9. How can Price discrimination properly work?
Market Power
No high competition, so prices can be controlled
Distinct Customer Group
Divide customers, by price sensitivity
Difficult Resale
More product is consumed,
less likely to sell used.

10. How markets get around price discrimination?
Offer discount to consumers who will not pay the high prices.
Effect: Usually charge higher prices to people that need it the most.
Offer manufacture rebates
Offer Senior & student discounts
Offer FREE Promotions

11. Monopoly Characteristics:
Forms Economies of Scale
Producers cost is low, as production increases. (causes low prices)
If limited cost & production will increase. (Cause high prices)
Rarely achieved because production becomes more efficient with increased production.
Can form into a Natural Monopoly

12. Monopoly Characteristics:
Natural Monopolies
Works best with 1 large business providing all the output.
2 or more businesses lower prices & quantities, to where multiple businesses cannot last.
Allowed so resources are not wasted
Government controls prices & services
Can be replaced by technology

13. Monopoly Characteristics:
Government Monopoly
Government regulates and creates barriers of entry.
Controls Industrial Organizations
Allows the businesses within the industry, to restrict the number of businesses in the market
Causes high prices, because supply is limited
Helps form technological monopolies

14. Monopoly Characteristics:
Technological Monopolies
Formed by patents
Gain profit from research without competition
Franchise
Keeps small markets under control
License

15. Monopolistic Competition
4 Conditions
Many businesses, with easy start-up cost
Few barriers of entry
Similar products or no patents
Many competitors
Slight control over price
Most control is in the hands of the consumer
Differentiation Products
Control over price is based on quality of product vs. other products.

16. Monopolistic Competition Characteristics:
Many Businesses sell similar products
Similar to perfect competition, but substitutes are created in most everyday life goods & services
Offer many varieties & therefore production cost are high and resources are not used efficiently.

17. Monopolistic Competition Characteristics:
Nonprice Competition
Physical Characteristics
Location
Service Level
Advertising/ Image/ Status

18. Monopolistic Competition Characteristics:
Price is high compared to perfect competition, but does not exceed monopolies.
Keep where consumers will still pay & obtain substitutes
Production & price stay fairly equal
Profit is earned just enough to cover cost because of competition & substitutes.

19. Oligopoly Characteristics:
Imperfect form of a monopoly, because it has a few businesses.
Businesses have high prices and low production, because they work together as a team.
Government licenses & patents, high start-up cost, nonprice competition & economies of scale will form barriers of entry

20. Oligopoly Characteristics: Factors are legal ways to cheat and control competition
Try to undertake price leadership to set prices
Sometimes end in price wars & then will form collusion
Collusion form price fixing
Illegal in USA
Cartels
Illegal in USA & usually do not last
Only survive if agree on price & production for profits to be even
Usually cheat & increase quota that lowers prices
Collapse if 1 groups is left out.

21. Economic Markets in Transition
Main reason why countries transfer to a mixed economy is because of it’s success & prosperity.

22. Economic Markets in Transition
Problems with other economies
Controlled by 1 group
Mistakes are common
Late arrival of supplies
Too much/ little of goods produced
Not delivered to correct locations
Process complicated
Limited access to goods because low levels of trade.

23. Economic Markets in Transition Current Problems facing transitions:
Trade makes items cheaper & harder to compete with.
Unemployment is high
Getting used to/ forming stock markets, private ownership of factories, and letting supply/ demand determine price.
High population rate (developing countries) above the GDP
Land locked countries and no access to water trade routes.
Lack of Natural Resources
Problems left over from war
Destroyed infrastructure, death, etc.
Severe Debt
Borrowed money to spur economic growth and now facing difficulty paying them off
Corruption

24. Economic Markets in Transition
Ways countries help countries in transition Globally.
Some try to overcome on own & we respect wishes
International Monetary Fund (IMF)
Give advice & financial assistance (monetary/ fiscal policy)
World Bank
Gives loans & advice to countries trying to improve economy
In total both organization have 127 billion in outstanding loans.