Market Structures Chapter 7

Get a Sheet of paper out ► List the following on a half sheet of paper:  Three favorite cereals  Three favorite brands of shoes  Three favorite brands of clothes  Three favorite soft drinks

Results to the Survey……… Did all of your answers have recognizable name recognition? I bet they did.. Why did you typically pick the ‘name brand’ over a generic brand name?

Advertising and marketing They clearly influence our purchasing power by consumers today. But why???

Its what we see every day on the television, the internet and on the radio.

Perfect Competition Perfect Competition, also called pure competition is an ideal market structure where the buyer (consumer) and the seller (producer) each compete directly and fully under the law of supply and demand. Who wins in this?

► The consumer benefits the most---that’s you-- -because it involves competition which helps fuel bringing prices down.

Perfect Competition exists when…. 1. Many buyers and sellers act independently 2. Sellers offer identical products 3. Buyers are well informed about products 4. Sellers can enter or exit the market easily

Monopoly Monopoly: This is a market in which a single seller exercises exclusive or nearly exclusive control over a good or product Monopoly: This is a market in which a single seller exercises exclusive or nearly exclusive control over a good or product

Monopoly It is against the law to have a monopoly business in the United States…… It is against the law to have a monopoly business in the United States……

Monopoly 1982: AT&T and the Justice Department agree on tentative terms for settlement of anti-trust suit filed against AT&T in AT&T agrees to divest itself of its local telephone operations. 1984: On January 1 the Bell System ceases to exist. In its place are seven Regional Bell Operating Companies and a new AT&T that retains its long distance telephone, manufacturing, and research and development operations. 1984: On January 1 the Bell System ceases to exist. In its place are seven Regional Bell Operating Companies and a new AT&T that retains its long distance telephone, manufacturing, and research and development operations.

Monopoly In 1975 Bill Gates and Steve Jobs created a new computer business In 1975 Bill Gates and Steve Jobs created a new computer business In 1976 they got the “Microsoft” trade name..Make $16,000 In 1976 they got the “Microsoft” trade name..Make $16,000 In 1978 they make there first million with the PET Commodore In 1978 they make there first million with the PET Commodore In 1979 they made In 1979 they made 2 million 2 million

Monopoly In 1983, Microsoft made 50 million In 1983, Microsoft made 50 million In 1986 the public could buy stock into Microsoft In 1986 the public could buy stock into Microsoft By 1990 Microsoft made over 1 billion By 1990 Microsoft made over 1 billion In 1991, the Justice Dept. looked into whether Microsoft was a monopoly. In 1991, the Justice Dept. looked into whether Microsoft was a monopoly. By 1996, Microsoft made 8.6 billion By 1996, Microsoft made 8.6 billion 1997, the Justice Department files papers against Microsoft. 1997, the Justice Department files papers against Microsoft the trial begins against Microsoft being a monopoly 1998 the trial begins against Microsoft being a monopoly In 1999, the court ruled against Microsoft; they appealed In 1999, the court ruled against Microsoft; they appealed

Monopoly In 2000, Microsoft made billion In 2000, Microsoft made billion In 2001, Microsoft settled w/ the gov’t agreeing to share programming material.. In 2001, Microsoft settled w/ the gov’t agreeing to share programming material.. In 2004 Microsoft made 38.8 billion In 2004 Microsoft made 38.8 billion In 2008, Microsoft made 57 billion In 2008, Microsoft made 57 billion

Oligopoly is a market in which a few large sellers control percent of the production of a good or service

Oligopoly Oligopolies are legal. The problem with them is that it limits competition which hurts the consumer. Oligopolies are legal. The problem with them is that it limits competition which hurts the consumer.

Other Key Terms Price War : A series of price reductions that may become so drastic that each seller involved suffers considerable losses

Price Wars Why have them? Businesses want your money instead of you going to the competitor. They are willing to cut into maximum profits to get your business.

Collusion: An effort by producers or sellers of a particular product to secretly set production levels or prices---which is illegal (Are oil companies doing this??)

Cartel: A group of producers or sellers of a certain good or service who unite to control prices, output, and market share (Are the diamond industries doing this)?

Merger This happens when two or more companies join to form one single firm This happens when two or more companies join to form one single firm Why do mergers happen?? Why do mergers happen?? Usually one company is struggling and they need money-- so they sell; sometimes an entrepreneur wants to retire and sell the business Usually one company is struggling and they need money-- so they sell; sometimes an entrepreneur wants to retire and sell the business Sometimes people merge for $ Sometimes people merge for $

Trusts: A group of companies that combine to eliminate competition in an industry and thereby gain a monopoly “Big- Business”

Antitrust Legislation Antitrust legislation were acts or laws which were designed to monitor and regulate big business, prevent monopolies from forming and dismantling any existing monopolies

BIGGEST ACT (Law) of them all……… Sherman Anti-Trust Act: This prohibits any agreements, contracts, or conspiracies that would restrain interstate trade or cause monopolies to form

The End