1. Market Structures CHAPTER 6 SECTION 1: Highly Competitive Markets
Holt Economics
4/15/2017
CHAPTER 6
Market Structures
SECTION 1: Highly Competitive Markets
SECTION 2: Imperfectly Competitive Markets
SECTION 3: Market Regulation
Chapter 6

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 1
Highly Competitive Markets
Perfect (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 1
Highly Competitive Markets
Monopolistic competition is a market structure in which producers sell different rather than identical products.

5. SECTION 1
Highly Competitive Markets
Sellers differentiate their products under monopolistic competition through nonprice competition, such as advertising.

6. Objectives: SECTION 2 How is an oligopoly structured?
Imperfectly Competitive Markets
Objectives:
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 2
Imperfectly Competitive Markets
Structure of an oligopoly:
only a few large sellers, and they control most of the production of a product
sellers offer identical or similar products
new sellers find market entry difficult

8. Characteristics of a monopoly:
SECTION 2
Imperfectly Competitive Markets
Characteristics of a monopoly:
one seller
no close substitute goods
difficult to enter market

9. Types of monopolies: SECTION 2
Imperfectly Competitive Markets
Types of monopolies:
natural monopolies—one large seller produces a good or service most efficiently
geographic monopolies—isolated geographic location attracts only one seller
technological monopolies—one producer owns the technology that created the market
government monopolies—government is the sole seller of a product

10. Factors that affect prices in oligopolies and monopolies:
SECTION 2
Imperfectly Competitive Markets
Factors that affect prices in oligopolies and monopolies:
consumer demand
potential competition
government 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 3
Market Regulation
Laissez-faire relationship between the federal government and business
Before the 1880s, the U.S. government did not interfere with business or the marketplace.

13. Purpose of early antitrust legislation:
SECTION 3
Market Regulation
Purpose of early antitrust legislation:
to monitor and regulate big business
to prevent formation of monopolies
to break up existing monopolies

14. Government enforcement of antitrust legislation:
SECTION 3
Market Regulation
Government enforcement of antitrust legislation:
broke up Standard Oil Company of Ohio in 1911 and AT&T in 1982 with the Sherman Antitrust Act
created watchdog groups, such as the Interstate Commerce Commission and the Federal Trade Commission
strengthened 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 6
Wrap-Up
1. 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?