Market_Structure_Notes Powerpoint presentation

Ppt

1. Competition and Competition and
Market StructuresMarket Structures
How well do you remember the four
market structures? Write them out
with two example.
Go Back Over Your Notes!!

2. What is a Market What is a Market
Structure?Structure?

The The naturenature and and degreedegree of of
competition among firms in the competition among firms in the
same industrysame industry

We classify We classify 44 Market Structures by Market Structures by
asking questions like:asking questions like:

3. We classify Market Structures by We classify Market Structures by
asking:asking:
1.1.How much How much control over pricecontrol over price does each does each
firm have?firm have?
2.2.HowHow many firmsmany firms are competingare competing in the in the
market?market?
3.3.How How large/what sizelarge/what size are each of the are each of the
firms?firms?
4.4.What are the What are the characteristics of the characteristics of the
productsproducts in each market? in each market?
5.5.How easy is it for new firms to How easy is it for new firms to enter the enter the
marketmarket??

4. Market StructuresMarket Structures

Perfect CompetitionPerfect Competition

Monopolistic CompetitionMonopolistic Competition

OligopolyOligopoly

MonopolyMonopoly

5. MONOPOLYMONOPOLY
Warm UpWarm Up::
Why did the U.S. gov’t Why did the U.S. gov’t
make monopolies illegal??make monopolies illegal??

6. MARKET STRUCTURESMARKET STRUCTURES ::

7. Perfect CompetitionPerfect Competition
Meets 5 Conditions:Meets 5 Conditions:
1.1.Large number of buyers and sellersLarge number of buyers and sellers
2.2.Buyers and sellers deal in Buyers and sellers deal in identicalidentical
productsproducts
3.3.Buyers and sellers Buyers and sellers act independentlyact independently
4.4.Buyers and sellers are Buyers and sellers are well-informedwell-informed
5.5.Buyers and sellers are free to Buyers and sellers are free to enter enter
into, conduct, or get out of into, conduct, or get out of
businessbusiness

8. Imperfect Competition-Imperfect Competition-
lacks 1 or more of the 5 conditionslacks 1 or more of the 5 conditions
1.1.Monopolistic CompetitionMonopolistic Competition
2.2.OligopolyOligopoly
3.3.MonopolyMonopoly

9. Monopolistic CompetitionMonopolistic Competition
Has every Has every condition except condition except identical identical
productsproducts!!
These Firms can These Firms can monopolizemonopolize a small part a small part
of the market by:of the market by:
1.1.Product DifferentiationProduct Differentiation – make their – make their
product seem product seem special special through adsthrough ads
2.2.Non-price CompetitionNon-price Competition - use of - use of
advertisements, giveaways, promotions advertisements, giveaways, promotions
to get your businessto get your business

10. OligopolyOligopoly
Where few very large sellers Where few very large sellers
dominate the industrydominate the industry
Any firm within this market Any firm within this market
structure can cause a change structure can cause a change
in output, sales, or pricesin output, sales, or prices
A few control 2/3s of the
industry

11. Must use Must use InterdependentInterdependent
BehaviorBehavior

Collusion:Collusion:
•A A formal agreementformal agreement to set prices or limit to set prices or limit
output, acting as one company.output, acting as one company.

Price Wars:Price Wars:
•When one firm When one firm lowers priceslowers prices other firms other firms
will will followfollow in a series of price cuts that in a series of price cuts that
result in unusually low pricesresult in unusually low prices

12. MonopolyMonopoly
Market Structure Market Structure
with only with only
1 seller1 seller of a of a
particular productparticular product
The federal
government has
outlawed
monopolies for
over 100 years.
Trustbusting
T.R. and the
Sherman Anti-
Trust Act
started it off!

13. Natural MonopolyNatural Monopoly
-A market situation where -A market situation where costs of costs of
productionproduction are minimized are minimized by having a by having a
single firm produce the productsingle firm produce the product
What are the other
natural monopolies in
Western New York?

14. Geographic MonopolyGeographic Monopoly
A monopoly based on A monopoly based on
absenceabsence of other sellers of other sellers
LUCK OF LOCATION !!!
Example: Thruway gas
stations!!

15. Technological Technological
MonopolyMonopoly
Based on the Based on the ownership of a methodownership of a method of of
production, scientific advance, method production, scientific advance, method
or processor process
•Patents - granted by government, exclusive right to
manufacture, use, or sell any new and useful
Invention
•Copyrights - given to art or literary work and is
exclusive right of artist to publish, sell, or reproduce
for their lifetime plus 70 years

16. Government MonopolyGovernment Monopoly
Government owns and Government owns and
operatesoperates a monopoly at a monopoly at
National, State and Local levelsNational, State and Local levels
What other services
does govt provide us
that are paid for
with our taxes?

17. HOMEWORK HOMEWORK 

Grab your textbook and you have the Grab your textbook and you have the
remainder of the period to work on remainder of the period to work on
this assignment. It will be collected this assignment. It will be collected
for a grade tomorrow!!for a grade tomorrow!!

18. Top Ten Most Common Words Top Ten Most Common Words
WRITTENWRITTEN in the U.S. in the U.S.
10. For10. For
9. It9. It
8. Was8. Was
7. Is7. Is
6. To6. To
5. In5. In
4. A4. A
3. And3. And
2. Of2. Of
1.1.TheThe

19. It’s your time to It’s your time to shineshine
with with designdesign!!
Design advertisement posters for the Design advertisement posters for the
market structures your group has market structures your group has
been assigned. Your posters must been assigned. Your posters must
have the following…have the following…
*A Slogan
*Picture of the Product or Service
*Company Name
Please: DO NOT write what Market Structure it is!

20. Pop Quiz Time!!Pop Quiz Time!!
1.1.Name three products that would fall Name three products that would fall
in the monopolistic competition in the monopolistic competition
market structure.market structure.
2.2.What makes an oligopoly, an What makes an oligopoly, an
oligopoly?oligopoly?
3.3.What are two different industries What are two different industries
that fall in oligopoly?that fall in oligopoly?
4.4.Name three legal monopolies.Name three legal monopolies.

21. Pop QuizPop Quiz
5. What is product differentiation?5. What is product differentiation?
6. What is collusion?6. What is collusion?
7. How do price wars help consumers?7. How do price wars help consumers?
8. What are three perfect competitive 8. What are three perfect competitive
firms?firms?
9. What makes perfect competition 9. What makes perfect competition
perfect?perfect?
10. Why are most monopolies illegal?10. Why are most monopolies illegal?

22. Answers:Answers:
1.1.1 pt. each: shampoo, cereal, soap, 1 pt. each: shampoo, cereal, soap,
hair spray, soup, computer games.hair spray, soup, computer games.
2.2.1 pt.: a few firms; 1 pt.: 2/3’s 1 pt.: a few firms; 1 pt.: 2/3’s
industry.industry.
3.3.1 pt. each: soda, gelatin, fast food, 1 pt. each: soda, gelatin, fast food,
gas manufacture, local grocery gas manufacture, local grocery
markets, etc.markets, etc.
4.4.1 pt. each: Nat’l Fuel, Nat’l Grid, 1 pt. each: Nat’l Fuel, Nat’l Grid,
Books, Songs, Scripts, © Books, Songs, Scripts, ©

23. Answers:Answers:
5.5.1 pt.: advertising to make g&s 1 pt.: advertising to make g&s
seem unique although not really; seem unique although not really;
make it seem make it seem specialspecial. .
6.6.1 pt.: When firms work together to 1 pt.: When firms work together to
limit production or raise priceslimit production or raise prices
7.7.1 pt: When firms compete and keep 1 pt: When firms compete and keep
lowering prices!!lowering prices!!

24. Answers:Answers:
8.8.1 pt each: any farm products: 1 pt each: any farm products:
apple, orange, beef, milk, etc.apple, orange, beef, milk, etc.
9.9.2 pts: 2 pts: many firmsmany firms that sell that sell identicalidentical
productsproducts
10.10.1 pt: too much power, price 1 pt: too much power, price
gouging, etc.gouging, etc.

25. What happens when the What happens when the
market fails??market fails??
HOMEWORK:HOMEWORK:
Create a 4 – Square for each Create a 4 – Square for each
of the four market failuresof the four market failures