2. Market Structures

3. Least (Level of competition)Most Virtually identical products Many big names but product variety 75%+ market share Full barriers & price control No price control (S&D) Little price control, competitive Similar goods Econ of Scale? Natural? 1000’s of producers ~10-~100 producers 2-5 producers 1 producer Perfect Competition Monopolistic Competition OligopolyMonopoly

4. Apply the structures to your world What are some examples of industries that fall into each of these categories? List examples for each—be ready to defend or prove your choice.

5. Key Components of Perfect Competition Almost all PC industries are with commodities—virtually identical products Generally lowest start up costs and barriers of any business Market forces determine prices—producers helpless to control the prices! –Therefore, gov’t protections are sometimes needed for national security & self sufficiency Should gov’t set prices in PC for farmers?

7. Key Components of Monopolistic Competition Products are different (Subway v. McD’s) & substitutes are available— marketing strategies important Non-price competition—ex: extra service, bonus, 20% free!, different products… When firms raise prices consumers find substitutes? Highly competitive!!

8. Merger Mania?

9. Oligopoly Characteristics What results if Coke & Pepsi merged? Government’s role is to keep the competitiveness of the oligopoly and block the merger. Collusion & Price Fixing are illegal but it is hard to prove. –Collusion & price fixing are usually short lived (cartels simulation) Should Gov’t split the companies to change Oligopolies to MC?

10. Merger? Collusion?

11. Oligopoly Collusion or Competition?

12. USA Hooked on OPEC

13. Monopoly Characteristics Unrestricted monopoly is bad for consumers & competition! Allowed when best for consumers— Natural Monopoly When is a monopoly good? Economies of scale—p. 157 read –This determines the market structure of an industry! Diminishing Returns—apply? Patents—Used as incentives to innovate! Franchise licenses—contracted or purchased monopolies

14. Roosevelt puts Trusts on a Diet! Is Microsoft a Monopoly? Why sued?

15. Bill Gates’ bed time stories

16. Questions Why do some industries fall naturally into less competitive categories? –Ex: Airlines, Autos, Cable, Power? (Economies of Scale) Should the government step in to make industries like Airlines more competitive? If so, would it work? Should Education be privatized or is it better off as a Natural Monopoly?

17. Minimum Wage & Unemployment