COMPETITION AND THE MARKETPLACE

OBJECTIVES Display understanding of different types of markets Explain how businesses respond to different market conditions in order to better compete Compare and contrast the impact of differing market structures on the success of a product or a service

KEY VOCABULARY Antitrust Barriers to entry Cartel Collusion Economies of scale Externalities Geographic monopoly Government monopoly Market power Monopolistic competition Monopoly Natural monopoly Non-price competition

KEY VOCABULARY Oligopoly Perfect competition Price elasticity Price fixing Price maker Price taker Product differentiation Technological monopoly

HOMEWORK PASS MARKETPLACE Pass out NAF bucks Homework due tomorrow A two-page research paper on the effect of market competition on the pricing of avocados A five-minute oral presentation on market systems throughout the developing world However, I can be bought Homework passes are 10 bucks a piece

HOMEWORK PASS MARKETPLACE 4 sellers with 18 passes each Seller’s goal is to make as much money as possible Buyers still with 20 bucks Goal is to pay the least Before each round ask each seller to secretly write his or her selling price on a sheet of paper The sellers reveal their prices simultaneously Buyers can choose to buy or wait until the next round When the third round is over, have the sellers tally up their NAF Bucks and report back the results

HOMEWORK PASS MARKETPLACE Work in pairs to answer the following questions. Turn into drop box Was the price for the passes higher or lower when the teacher was selling them? Why? When the students sold passes, did the seller with the highest prices make the most money? Why or why not? Did prices tend to go up or down during the three rounds of student sales? Why?

ASSIGNMENT 1. Explain and illustrate ways in which large-scale business can be beneficial to the consumer. 2. Explain and illustrate ways in which large-scale business can harm the consumer. 3. Describe some of the problems sometimes created by concentration of business. 4. Why do expanding firms often combine with other firms? 5. It has been said that the average Americans of today accept big labor / big company price leadership, mergers, etc. as economic facts of life about which they can do very little. Do you agree? 6. Are monopolies and oligopolies a menace to our free enterprise system? Explain.

HOMEWORK PASS MARKETPLACE Competition among the different sellers, combined with the consumer’s desire to buy at the lowest price possible, helps to keep in check price

GUIDE TO FORMS OF THE MARKET Four major types of markets (also called market structures) in a market economy: perfect competition, monopolistic competition, oligopoly, and monopoly. Which of these market structures most closely resemble the homework pass situation when I was selling? What about when you were selling? Download: Learning Guide- Market Structures Download: Worksheet- Market Structures Defining Format Work in pairs, turn into drop box

INTRODUCTORY MEMO You will be forming consulting teams that are all vying for a contract with a major avocado grower and distributor How can we, as consultants in a competitive economy, best help our potential client respond to the opportunities and threats in the marketplace?

INTRODUCTORY MEMO Download: Memo- Elevator Pitch Your first task is to prepare a short “elevator pitch” that you can use when they meet the CEO at the upcoming National Avocado Grower’s Conference in Orlando, Florida You will have about two minutes to informally talk with Armina J. Pitts, the CEO of the Awesome Avocado, and impress her with your understanding of the “economics behind the prices, costs, and profits of Awesome Avocados over the past two years,” and your ability to “predict revenue and profit for the next year.”

DEVELOP INITIAL “KNOW, NEED TO KNOW” LIST How can we, as potential consultants to an avocado production company, understand the economics behind their prices, costs, and profits over the past two years, and predict revenue and profit for the next year? Download: Worksheet- Know, Need to Know Fill in the first column for discussion Fill in second column

ANALYZE PRODUCTION TABLES Download: Chart Avocado Sales Data How does the quantity of avocados sold vary with price? How did the demand for avocados change between 2008 and 2009? How did the change in demand between 2008 and 2009 affect profit?

DEMAND AND PRICING Presentation

PREPARING THE ELEVATOR PITCH “Elevator pitch”—sometimes the only opportunity to pitch an idea is during a short elevator ride with a potential client or funder Write a one-page script for a two-minute elevator pitch that summarizes what the data show about prices, costs, and profits in the low-calorie avocado market Use the memo and the chart data to draft your pitch

PEER REVIEW Present elevator pitch to another group for review What did you like? What would you improve on? What would you do differently? Revise pitches and prep for presentation

INTRODUCTION TO PRESENTATION ON COMPETITION Download: Memo- Increased Competition Prepare another two-minute presentation for the CEO to explain why profits have fallen

COMPETITION Presentation

PRESENTATION PLANNING Download: Guide- Competition Presentation presentations must reveal an understanding of the role of prices and profit in the processes and outcomes of competitive markets

PRESENTATION TO CEO Present your 2 minute presentations

STICKY NOTE REVIEW You are the CEOs of a new athletic shoe manufacturing company trying to break into the market Decide whether or not each market type would be good or bad for their business, and come up and place a + on those market types that would be good for their new business, a – on those that they think would be challenging, and a ? on those that might be good or challenging

ENRICHMENT Monopoly Research: There have been several high-profile cases in recent years in which the courts, on the initiative of the federal (or individual state) government, have acted to block or restrict monopolistic business practices of certain companies The courts also sometimes impose conditions (known as “remedies”) on what the companies concerned are allowed to do, so as to restrict or prevent monopolistic business practices in the future Research Microsoft’s antitrust legal battle with the Antitrust Division of the US Department of Justice Focus specifically on the reason(s) behind the federal government’s decision to go after Microsoft for what, in the Antitrust Division’s view, was anti-competitive corporate behavior (especially the inclusion of the Internet Explorer web browser as part of the pre-loaded software applications that came on the majority of PC computers)

ENRICHMENT Write a report addressing whether or not Microsoft was (is) a monopoly, and whether or not the US government’s action was justified in relation to its declared objective of bringing about a more competitive market structure in the market for Internet browsers Ask students to take a poll of 50 school peers to see which browser they use when surfing the web, and include these findings in their analysis of the government decision to go after Microsoft on this issue.

CROSS-CURRICULAR INTEGRATION Science (Chemistry/Biology): Research and write a report assessing the granting of monopolies (patents) for a period of time to manufacturers of pharmaceuticals (prescription drugs), and whether or not this practice serves the greater public good. Look into the claims that pharmaceutical companies make about the necessity of patents (for example, to make research and development—R&D—more profitable); and their actions when patents on blockbuster drugs, the industry’s “best sellers,” expire.