1. Microeconomics
Market Structures

2. Four Types of Competition
Perfect Competition
Monopolistic Competition
Oligopoly
Monopoly

3. Key Terms Commodity - PC Economy of Scale - M Franchise - M
Differentiation - O
Collusion - O
Cartel – O
Regulation - MC
Merger - MC

4. commodity
Product that is the same no matter who produces it

5. Economy of scale
Factors that cause a producer’s average cost per unit to fall as output rises

6. franchise
Right to sell a G/S in an exclusive market

7. differentiation
Making a product different from other similar products

8. collusion
Agreement among firms to divide market, set prices, or limit production

9. cartel
Formal organization of producers that agree to coordinate prices and production
O.P.E.C. – Organization of Petroleum Exporting Countries

10. regulation
Government intervention in a market that affects the production of a good

11. merger
Combination of 2 or more companies into a single firm

12. 3 types of mergers V e C H o r i z o n t a l t n i g c l a o l m e r a

13. Altering Competition
Price Fix – agreement among firms to charge one price for the same good
Price War – series of competitive price cuts that lowers the market price below cost of production

14. Market Structure Table
firms
goods
price
barriers
costs
regulation
example
graph PC MC O M

15. Comparing Market Structures
Category Description
Numbers of firms – amount of choice for the consumer
Variety of goods – amount of difference in brands
Control over prices – influence each firm has on the market
Barriers to entry/exit – cost of production, effects of company on the market

16. Comparing Market Structures
Category Description
Start-up costs – type of G/S, knowledge and cost to produce first unit
Regulation – amount of government intervention, how many rules, licensing, subsidies
Example – G/S in that type of market place
Demand curve – compared to a market demand

17. Market Demand Curve $ S E D Q

18. Perfect Competition Many, virtually unlimited None, commodity
None, too many choices for individuals, firms
None, low costs, easy to make, no effect
Low, inexpensive lay-out
None, safe, high quality
Tomatoes, craft show

19. Perfect Competition $ S
Firm Demand Curve E D Q

20. Monopolistic Competition
Many firms
Differentiated products
Little price control
Small knowledge-base
Production, Distribution, Final G/S
Relatively low, flat marginal returns
Minimal regulation
Clothing, toiletries, autos

21. Monopolistic Competition$ S E
Firm Demand D Q

22. Oligopoly Few firms Differentiated products
Some control over prices, market control
Specialized knowledge
Production, Distribution, G/S
High start-up costs, good marginal returns
Much regulation
Phone, airlines, banking, entertainment

23. Oligopoly $ S
Firm
Demand D Q

24. Monopoly One firm No variety of good, only one in market
Complete price control, unregulated
No new competition, can’t leave industry
High costs, economy of scale
Public corporation
Licensing, pricing, subsidized
Utilities

25. Monopoly $ S E
Firm
Demand D Q