2 Objectives: Highly Competitive Markets SECTION 1 What is perfect (pure) competition?What is monopolistic competition?How do sellers differentiate their products under monopolistic competition?
3 SECTION 1Highly Competitive MarketsPerfect (pure) competition is a market structure in which buyers and sellers each compete directly and completely under the laws of supply and demand.
4 SECTION 1Highly Competitive MarketsMonopolistic competition is a market structure in which producers sell different rather than identical products.
5 SECTION 1Highly Competitive MarketsSellers differentiate their products under monopolistic competition through nonprice competition, such as advertising.
6 Objectives: SECTION 2 How is an oligopoly structured? Imperfectly Competitive MarketsObjectives:How is an oligopoly structured?What is a monopoly?What types of monopolies exist?What factors affect prices in oligopolies and monopolies?
7 Structure of an oligopoly: SECTION 2Imperfectly Competitive MarketsStructure of an oligopoly:only a few large sellers, and they control most of the production of a productsellers offer identical or similar productsnew sellers find market entry difficult
8 Characteristics of a monopoly: SECTION 2Imperfectly Competitive MarketsCharacteristics of a monopoly:one sellerno close substitute goodsdifficult to enter market
9 Types of monopolies: SECTION 2 Imperfectly Competitive MarketsTypes of monopolies:natural monopolies—one large seller produces a good or service most efficientlygeographic monopolies—isolated geographic location attracts only one sellertechnological monopolies—one producer owns the technology that created the marketgovernment monopolies—government is the sole seller of a product
10 Factors that affect prices in oligopolies and monopolies: SECTION 2Imperfectly Competitive MarketsFactors that affect prices in oligopolies and monopolies:consumer demandpotential competitiongovernment regulation
11 Objectives: Market Regulation SECTION 3 What was the relationship between the U.S. government and business before the 1880s?What was the purpose of early antitrust legislation?How has the government enforced antitrust legislation?
12 Laissez-faire relationship between the federal government and business SECTION 3Market RegulationLaissez-faire relationship between the federal government and businessBefore the 1880s, the U.S. government did not interfere with business or the marketplace.
13 Purpose of early antitrust legislation: SECTION 3Market RegulationPurpose of early antitrust legislation:to monitor and regulate big businessto prevent formation of monopoliesto break up existing monopolies
14 Government enforcement of antitrust legislation: SECTION 3Market RegulationGovernment enforcement of antitrust legislation:broke up Standard Oil Company of Ohio in 1911 and AT&T in 1982 with the Sherman Antitrust Actcreated watchdog groups, such as the Interstate Commerce Commission and the Federal Trade Commissionstrengthened antitrust legislation with acts such as the Celler-Kefauver Act of 1950, the Antitrust Procedures and Penalties Act of 1975, and the Parens Patriae Act of 1976
15 CHAPTER 6Wrap-Up1. How does perfect competition differ from monopolistic competition? Give an example of each.2. How are oligopolies different from monopolies?3. How does a cartel operate? Why are cartels illegal in the United States?4. How do oligopolies and monopolies affect product choice and price?5. What factors encouraged the U.S. government to abandon its laissez-faire economic policies in the 1880s?