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Market Structure
More Competitive
Less Competitive
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Perfect Competition
Many buyers and sellers Buyers and sellers are price takers Product is homogeneous Perfect mobility of resources Economic agents have perfect knowledge Example: Stock Market
Prepared by Robert F. Brooker, Ph.D. Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide 3
Monopolistic Competition
Many sellers and buyers Differentiated product Perfect mobility of resources Example: Fast-food outlets
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Oligopoly
Few sellers and many buyers Product may be homogeneous or differentiated Barriers to resource mobility Example: Automobile manufacturers
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Monopoly
Single seller and many buyers No close substitutes for product Significant barriers to resource mobility
Control of an essential input Patents or copyrights Economies of scale: Natural monopoly Government franchise: Post office
Prepared by Robert F. Brooker, Ph.D. Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide 6
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P $45
QD 625 5P 625 5(45) 400 QS 175 5P 175 5(45) 400
Prepared by Robert F. Brooker, Ph.D. Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide 8
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Supply of Euros
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Monopoly
Single seller that produces a product with no close substitutes Sources of Monopoly
Control of an essential input to a product Patents or copyrights Economies of scale: Natural monopoly Government franchise: Post office
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Monopolistic Competition
Many sellers of differentiated (similar but not identical) products Limited monopoly power Downward-sloping demand curve Increase in market share by competitors causes decrease in demand for the firms product
Prepared by Robert F. Brooker, Ph.D. Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide 21
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