1. The Last Word: Ch 9 Guided reading due Friday

2. Chapter 9

3. Section 1

4.  Market structures are a way to categorize businesses by the amount of competition they face.  Four basic market structures in the American economy are:  perfect competition  monopolistic competition  oligopoly  monopoly.

5.  Many buyers and sellers  Similar products  Sellers in the market cannot prevent others from entering market, the initial investment costs are low, and the good/service is easy to learn to produce.  Information about prices, quality, and sources is easy to get.  Sellers or buyers cannot group together to control price.  Supply and demand control the price.

6.  The agriculture market is close to a perfectly competitive industry.  No single farmer has control over price.  Supply and demand determine price.  Individual farmers have to accept market price.  Demand for agriculture is unique; inelastic

7.  Price will drop to a level that benefits both consumer and entrepreneur.  Economic efficiency  Resources are used in most productive manner.

8. Section 2

9.  Most industries are a form of imperfect competition.  There are three types of imperfect competition that differ in how much competition and control over price the seller has.

10.  Most extreme form of imperfect competition  A single seller controls the supply and price of product  No substitutes: no competitor offers good or service that closely replaces what monopoly sells  No entry: a competitor cannot enter the market due to government regulations, large initial investment, or ownership of raw materials

11.  Almost complete control of market price  Can raise prices with no fear of competition  Natural monopolies are providers of utilities, bus services, cable, and have economies of scale, producing the largest amount for the lowest cost.  Geographic monopolies are created due to geographic barriers for competition

12.  Technological monopolies are the result of inventions that are patented and copyrighted.  Government monopolies are similar to natural monopolies but held by the government.  Monopolies are far less important than in the past, and don’t last as long.

13.  Dominated by several suppliers and a few sellers who control 70 to 80 percent of the market  Capital costs are high and it is difficult for new companies to enter market.  Goods/services provided by the few sellers are nearly identical.  Competition is not based on price but product differentiation is based on consumer perception of the value of one over the other.

15.  All the companies are interdependent; change in one will affect the others.  Interdependence can lead to price wars or the illegal act of collusion or teaming up to raise prices.  Cartels are international groups that use collusion to seek monopoly power. (ex. OPEC oil cartel)

16.  Numerous sellers  Easy entry into market  Differentiated product  Nonprice competition  Some price control by the seller  Advertising tries to convince consumers of the superiority of given product, enabling companies to charge more than the market price for a product.

17. Section 3

18.  Rockefeller monopolized the oil industry by creating interlocking directorates and putting Standard Oil people on boards of the competition.  Sherman Antitrust Act (1890) prevented new monopolies or trusts from forming and broke up existing ones.  Clayton Act (1914) sought to clarify the laws in Sherman Antitrust Act by prohibiting or limiting a specific number of business practices.  Federal government must determine whether merging of two companies will significantly lessen competition.

19.  Horizontal merger is the merging of two corporations in the same business.  Vertical merger is merging of two corporations in same chain of supply.  Conglomerates are the merging of two corporations involved in at least four or more unrelated businesses.

25.  Government makes laws regarding business pricing and product quality and uses regulatory agencies to oversee that various industries and services obey these laws.  Deregulation is when the government removes its regulations to increase competition.