Miss Dang

MARKET STRUCTURES
Market structure nature & degree of competition among firms doing business in the same industry

Laissez-faire allow them to do (limited

govt. intervention)

There are 4 types of market structure

PERFECT COMPETITION

EXAMPLE of Perfect Competition

Agriculture/Farmers Market

Why agriculture? Virtually identical products Many, many competitors Buyers wont shop with you if your prices are too high [Somewhat] easy to become a farmer

IMPERFECT COMPETITION
Monopolistic competition, oligopoly, and monopoly
Most firms/industries in U.S. fall into one of these categories. Results: less competition, higher prices for consumers, and fewer products offered. (That is why perfectly competitive markets are theoretically ideal situations.)

MONOPOLISTIC COMPETITION
Many competitors Similar products BUT Each seller has a UNIQUE difference in their product (product differentiation). They use NONPRICE COMPETITION to show UNIQUENESS. Its easy to enter the industry Must determine the UNIQUE difference buyers want Sellers have very little control over prices Can charge a slightly higher price for a good/unique product Sellers somewhat make profits

EXAMPES of Monopolistic Competition

Cell phone companies SIMILARITY: turn on, dial, make call/text, communicate Many to pick from Sprint AT&T Boost Verizon Amp T-Mobile Unique differences: Calling plans Phones carried Sellers lure (attract) Airlines SIMILARITY: take-off, fly safely, arrive at destination Many to pick from: United, Delta, Continental British Airways, Virgin, Lufthansa, AiItalia, Air Swiss, Lan Chile, AeroFlat, etc JetBlue, Southwest, Alaska, TACA, Northwest Unique differences Where they go Amenities

 Few, 3 or 4, major competitors Similar products, but clearly differentiated between sellers BRAND NAME IS IMPORTANT It is difficult to become a competitor Seller must take large portion of customers from other sellers Strong competition between sellers over prices Collusion is created to fix prices If successful, can be very profitable

EXAMPLES of Oligopoly
Automobiles by country of Breakfast cereals manufacture 3 or 4 major USA: Ford, GM, Dodgemanufacturers Chrysler (Kelloggs, General Japan: Toyota, Honda, Mills, Post, Quaker) Nissan Italy: Ferrari, Lamborghini, Masserati Germany: Mercedes, BMW, Audi, Porsche

MONOPOLY
ONE competitor Unique product no other like it Very difficult to become a competitor Would need to steal HALF the buyers Seller has total control over prices No equilibrium price

EXAMPLES of Monopoly
Illegal!!! Sometimes govt. believes it is in the best interest of the consumer to have a LEGAL monopoly and no competition between firms Examples: Public transportation Electric power Water/trash utilities

Types of Monopoly
Natural monopoly costs of production minimized because a single firm produces the product. (Utility companies) Geographic monopoly 1 firm monopolize in 1 area. Technological Monopoly ownership/control of a manufacturing method, process, or other scientific advance Government monopoly owned and operated by govt.

MARKET STRUCTURE STORYBOARD

IN GROUPS OF 3 or 4, CREATE STORYBOARDS FOR ALL 4 MARKET STRUCTURES WE JUST COVERED. USE YOUR TEXTBOOK P.169-177 (&NOTES)

In your own words, provide a good description of the market structure.

Provide an image sample of the market structure.

40 points (10 pts for each market structure)

Using your textbook, explain how this market structure maximizes profit.

Using your textbook, define any key terms for this market structure and answer the reading check questions in complete sentences.