1. <============================================  Perfect Competition MonopolyOligopoly MONOPOLISTIC COMPETITION Pure Free Market No Competition Market Structure Continuum

2. Monopoly Market Characteristics One Seller Unique Product—(no substitutes) Very difficult to enter/leave industry Price Setters: great deal of price control

3. Examples of Monopolies More Distant Past: Standard Oil (John D. Rockefeller) United States Steel (Andrew Carnegie) More Recent Past: American Telephone & Telegraph (AT & T) Microsoft

4. Current Monopolies NATURAL MONOPOLY: a market that runs most efficiently when one firm supplies all of the output Electric Utilities Water for your home Garbage collection LOCAL MONOPOLY: for various reasons there are no other competitors in a geographic area i.e. only gas station in a small town Avoid buying gas here if you can!

5. Bottom Line: Monopolies lead to a) Higher price & lower Quantity produced b) Less variety of products

7. Anti-Trust Laws Anti-Trust Laws, administered by the U.S. Department of Justice, can be used to a)Break up a monopoly (like Standard Oil or AT & T) b) Prevent companies from merging to maintain competition (AT & T and T-Mobile?)

8. Video clip from “Fair Fight in the Marketplace” Offender: Archer Daniels Midland Co. (segment 2) 6 min. 24 sec.

9. <============================================  Perfect Competition Monopoly OLIGOPOLY Monopolistic Competition How close to Adam Smith’s World? Pure Free Market No Competition U.S. Economy

10. Oligopoly Examples Car makers Steel industry Aircraft manufacturing Oil industry Airlines Tobacco industry Beer industry Soda industry Home Improvement Music recording industry Textbook industry Wireless communications industry Aerospace industry

11. N0, because of Economies of Scale. Economic Activity is often MORE EFFICIENT when done on a LARGE SCALE Can you have Perfect Competition in: Automobile Production Airliner Production

12. Economies of Scale Definition: factors that cause a producer’s average cost per unit to fall as output rises

13. Economies of Scale Example 1 unit of energy 100 units of energy 1000 units of energy 10,000 units of energy 100,000 units of energy 1,000,000 units of energy Cost of building power plant (fixed cost) $10,000,000 Cost per unit of energy produced $10,000,000 $100,000 $10,000 $1000 $100 $10