Aim:What is market structure? HW:pg 154 # 1,5 9Hxy-TuX9fs

Market structure Degree of competition between businesses in the same industry

1. Pure competition Large # of buyers and sellers – no one large enough to affect price Deal in identical products – no preference, no need to advertise Buyers/Sellers act independently

2. Monopolistic competition All of the conditions of pure competition are present except for identical products Product Differentiation- real or perceived differences Leads to-Non-Price Competition – advertising,

3. Oligopoly Very few large sellers of a product dominate market Decision by one can affect the whole industry Prices tend to be higher Interdependent Behavior – act together Price leadership – largest firm

4. Monopoly Exact opposite of pure competition Only one seller of an economic product with no close substitutes

`` 1. Natural Monopoly - Single firm producing product is more efficient and costs are minimized 2. Geographic Monopoly - No other competition due to location 3. Technological Monopoly- Given to those who invent new product or process 4. Government Monopoly-Business is government owned and operated

Market Failure Failure in the system Prices do not reasonably reflect the costs of production

Government Involvement Government is a consumer and supplier of goods and services in our economy pass laws to secure economic freedom and insure competition

Anti-Trust Laws Sherman Anti-trust Act 1890 – dissolved monopolies, or any business that interfered with competition Clayton Anti-trust Act 1914 – outlawed price discrimination(different prices for the same product) Federal Trade Commission 1914 – cease and desist orders to stop unfair practices