Warm-up (I will collect for a daily grade) Take a few minutes and write a paragraph about the word recession. What do you associate with that word. What have you heard in the news about recession? I want to know your thoughts!

GOVERNMENT AND MONOPOLIES THE BUSINESS CYCLE

Competition  Perfect Competition has many buyers and sellers that are well informed about products; it also has sellers that are able to enter and exit the market freely  Markets with more competition have the lowest prices, more efficient production, and higher quality goods  Perfectly competitive markets are efficient at equilibrium

Competition continued…  Few markets are perfectly competitive because barriers keep the companies from entering or leaving markets easily  start-up costs are high  many require high degrees of technology

Monopolies  Monopolies- a market with many buyers dominated by a single seller Why are monopolies a problem? Little or no competition Monopolies can set their prices as high as they want Consumers suffer

Types of Monopolies  Natural Monopoly - a market that runs most efficiently when one large firm supplies all of the output; in return, the government controls the prices and services it provides  Example- water companies regulated by the government so one water company services a region; prevents waste of resources

Types of Monopolies continued…  Government Monopolies- A monopoly created by the government through the issue of patents and licenses  encourages new research and development that benefit society as a whole  Example- a patent for a new medicine that allows the company the exclusive right to sell it

Government Regulation  Antitrust Laws- laws passed to control monopoly power and preserve competition in the marketplace  Antitrust Laws have been used to stop the power of many famous monopolies- Standard Oil, American Tobacco, AT&T, and Microsoft

Oligopoly  Oligopoly- a market structure in which a few large firms dominate a market  Example- 4 largest firms produce 70-80% of the output

Monopolistic Competition  Monopolistic Competition- a market structure in which many companies sell products that are similar but not identical

GDP Gross Domestic Product (GDP)- the dollar value of all final goods and services produced in a country in a single year GDP can increase simply by prices increasing from one year to the next- inflation

The Business Cycle  The Business Cycle- ups and downs of the economy between growth and recession

The Business Cycle continued…  Peak - Economy is operating at the full potential, low unemployment, high prices  Contraction - Economy starts to decline, jobs are cut, decrease in investment, prices start to drop

The Business Cycle continued…  Trough - High unemployment, deflation, a recession or depression could occur if it lasts long enough  Expansion - Economy begins to grow, jobs are created, investment increases

The Business Cycle continued… What is the period of decline?  Recession- takes place when real GDP declines for 6 straight months or more  Recessions do not usually last as long as the economic expansion periods  Recessions affect peoples’ jobs causing unemployment

Economic Indicators  Unemployment Rate- the percentage of people in the civilian labor force who are not working but are looking for jobs  Consumer Price Index (CPI)- government tracks the prices of 400 common products each month to see if inflation is occurring

Monopolistic Competition OligopolyMonopoly # of firms Variety of goods Control over prices Barriers to entry Examples

Monopolistic Competition OligopolyMonopoly # of firmsManyFew dominate One Variety of goods Some None Control over prices LittleSomeComplete Barriers to entry LowHighComplete ExamplesJeansMovie studios Public water