Do Now Discuss with a partner…. “How many companies make cereal?”

Market Structures perfect to imperfect

Market Organization Perfect Competition Monopolistic Competition Oligopoly Monopoly All imperfect

Market Organization Perfect Competition Monopolistic Competition Oligopoly Monopoly

Perfect Competition Perfect Competition – is a form of market organization where many small firms produce the same product. Leads to efficient production Leads to lower prices.

Perfect Competition Example

Lots of competition

What happens if a vineyard prices their grapes too high?

Characteristics of perfect competition… Many Sellers

Barriers to entry Things that make it difficult for firms to enter the market. Like start up costs. There are few barriers to entry IF ANY in a perfect competition.

Characteristics of perfect competition… Many Sellers Identical products

Identical Products Commodities – A product that is considered the same regardless of who makes or sells it.

Commodities

Characteristics of perfect competition… Many Sellers Identical products Well Informed consumers

Characteristics of perfect competition… Many Sellers Identical products Well Informed consumers No price controls

Firms have No control over price

Take 3

Discuss with a partner What are the 4 characteristics we see in perfect competition? What control do firms have over price? Give an example of a good that is in perfect competition.

Sometimes when you go to the store you have to decide between brands Sometimes when you go to the store you have to decide between brands. Which one is better? Is one worth more? It’s not always orange and organge.

Market Organization Perfect Competition Monopolistic Competition Oligopoly Monopoly

Monopolistic Competition Monopolistic Competition – a market organization where many firms produce goods that are similar enough to be substitutes but are not identical.

Example

Characteristics of monopolistic competition… Many Firms

Characteristics of monopolistic competition… Many Firms Few barriers to entry

Characteristics of monopolistic competition… Many Firms Few barriers to entry Limited control over price

Why don’t they have total control over price? SUBSTITUTES

Characteristics of monopolistic competition… Many Firms Few barriers to entry Limited control over price Differentiated products

Monopolistic Competition Firms have to fight for consumers dollars. They do this through: Price changes Changing physical characteristics Level of service for the consumer Building an image through advertising

Why have you never seen a commercial for paperclips?

What are some other goods or services involved in monopolistic competition?

Get a textbook Read pages 128 – 131. Answer the questions that appear after each section of reading. Identify Central ideas, main ideas and compare points of view. Answer these on the notecard provided.

Discuss with a partner What is the difference between perfect competition and monopolistic competition? What is a barrier to entry? Prepare for a QUIZ

Market Organization Perfect Competition Monopolistic Competition Oligopoly Monopoly

Oligopoly Oligopoly–is a form of market structure where a few very large firms dominate the industry.

Examples

More examples

Even more Examples

One last one

Oligopoly Pure oligopoly–products are the same for all firms. milk, paint, wireless service Differentiated oligopoly–products are similar but different. Coke & Pepsi

Barriers to entry There are many barriers to entry. Patents Licenses Technology Expensive machinery

Issues with Oligopoly Often these few firms work together to help increase the price of their goods. Collusion – price fixing Cartels – A formal agreement to coordinate production and prices

https://www.youtube.com/watch?v=JMq059SAQXM

Monopoly A pure Monopoly is a form of market organization where there is only one seller of a product.

Examples of Monopolies

Natural Monopoly This situation occurs when the costs of production are minimized by having a single firm produce the product. Barrier to entry is the cost of running the business

Natural Monopoly

Natural Monopoly

Technological Monopoly If a firm controls a certain process or a scientific advance that no one else can have. Barrier is the technology.

Technological Monopoly

Governmental Monopoly Patents and licenses granted from the Government can create the monopoly. Barrier is the government regulation of the product.

Government Monopoly

Why aren’t they monopolies anymore?

Antitrust Laws Antitrust Laws work to prevent companies from forcing out competition. They… Break up Monopolies Block Mergers Encourage competition Federal Trade Commission and the Department of Justice

Government Regulation It is in the best interest of consumers that competition exists between firms. This leads to lower prices. Government works to prevent Monopolies and Oligopolies for this reason.

Standard Oil The company controlled all phases of oil production. The case broke up standard oil into 34 smaller, competing companies. Exon mobile and Shell are a result of this break up.

AT&T In the 1980’s it was broken up into 7 smaller companies. Verizon is a direct result of this break up.

Kodak For a period it was the only company that knew how to make AND develop color film. They were forced to give other companies the technology.

Monopoly… it’s more than just a game, or is it? “What economic principles are illustrated in the classic game Monopoly? And how are they illustrated?” On Wednesday you will be given time in class to write out a response to the question above. While you play be sure to write down your thoughts as to what economic ideas are being used. Examples could be government regulation, prices, scarcity…

Apple Vs. Wombat Trial

The Flow Begin with FTC opening statement Prosecution can make their case. FTC will “cross examine” for clarification. Defense will make their case. Prosecution Closing Statement Defense Closing Statement

Essay Prompt One a sheet of lined paper answer the following in essay form. What are the benefits and risks of allowing larger corporations from merging with competition? Discuss the impact on both consumers and producers. (Feel free to reference the apple/wombat case in your analysis.)

Monopoly Quiz In an essay explain which economic principles are illustrated in the classic game Monopoly and discuss how are these are illustrated. Put your finished quiz in the mesh and pick up a Trial assignment sheet to read over while you wait for your classmates.

Perfect Competition Many Firms Identical Items Keeps prices low Makes Firms be efficient

Monopolistic Competition Many Firms Similar items (substitutes) Prices could be higher but competition keeps them from going too high Fight for consumers loyalty

Oligopoly Very Few firms control 70 – 80% of the market Similar items Use price to drive out competition Work together to dominate the market

Monopoly One firm No competition Price is completely in their control