Market Structures n Pure Monopoly n Perfect Competition

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Market Structures n Pure Monopoly n Perfect Competition n Monopolistic Competition n Oligopoly

Market Structures n Pure Monopoly n Perfect Competition n Monopolistic Competition n Oligopoly

Characteristics of a Pure Monopoly n A single seller n No Substitutes n No

Characteristics of a Pure Monopoly n A single seller n No Substitutes n No Entry – market is protected by barriers of entry. Gov’t regulation, large investment, ownership of raw materials. n Almost Complete Control of Market Price - control supply of good or service.

Types of Monopolies n Natural Monopolies n Help avoid overlapping n Government regulates price

Types of Monopolies n Natural Monopolies n Help avoid overlapping n Government regulates price n Examples: Public Water, Utilities n Government Monopolies n Created by the government n Technology, patents, franchises, license n Geographic Monopolies n Walmart

Conditions of Perfect Competition n Large Market – numerous sellers/buyers n Similar Product –

Conditions of Perfect Competition n Large Market – numerous sellers/buyers n Similar Product – identical good or service n Commodities = a product that is the same no matter who produces it. n Easy Entry and Exit – sellers can NOT prevent competition. Initial costs of investment are small, and goods/services are easily learned. n Start-up costs and the internet

Conditions of Perfect Competition n Easily Obtainable Information – information about prices, quality, and

Conditions of Perfect Competition n Easily Obtainable Information – information about prices, quality, and sources of supply is easy for both buyers and sellers to obtain. n No Control Over Price – the workings of supply and demand control the market.

Characteristics of Monopolistic Competition n Numerous Sellers – no one dominates Relatively Easy Entry

Characteristics of Monopolistic Competition n Numerous Sellers – no one dominates Relatively Easy Entry Differentiated Products – slightly different products to attract customers.

Characteristics of Monopolistic Competition Nonprice Competition – advertising, physical characteristics, location, service level n

Characteristics of Monopolistic Competition Nonprice Competition – advertising, physical characteristics, location, service level n Some Control Over Price n Toothpaste, most neighborhood businesses

Characteristics of an Oligopoly n Domination by a Few Sellers § Top sellers account

Characteristics of an Oligopoly n Domination by a Few Sellers § Top sellers account for 80% n Barriers to Entry § Sometimes created by gov’t n Identical Products or Slightly Different

Characteristics of an Oligopoly n Nonprice Competition – minor differences in product n Limited

Characteristics of an Oligopoly n Nonprice Competition – minor differences in product n Limited Control Over Price – price wars, price fixing, collusion Example of Oligopoly – The Airline industry