MARKET STRUCTURES

What you write: Market classification based off of: number and size of firms type of product type of competition What you need to know: What is a market structure? The definition is a “market classification according to number and size of firms, type of product, and type of competition; nature and degree of competition among firms in the same industry”

What you write: few firms = seller has more power more firms = consumer has more power What you need to know: Who has the power in the market? When there are fewer firms in the market the seller has more power. When there are more firms in the market the consumer has more power.

What you write: There are four (4) market structures Perfect Competition Monopolistic Competition Oligopoly Monopoly What you need to know: How many market structures are there? There are four (4) market structures

What you write: Perfect Competition: Huge number of sellers Products are practically the same (so buyers will make their decisions based on the lowest price) Easy entry What you need to know: What is perfect competition? The definition is a “theoretical market structure characterized by a large number of well-informed independent buyers and sellers who exchange identical products and have freedom of entry and exit”

CONSUMER has a lot of power

What you write: Pros: Perfect Competition encourage efficiency Consumers are charged a lower price Cons: Lack of product variety

What you write: Monopolistic Competition: Big number of sellers Products are differentiated (sellers try to convince the buyer the product is unique) Easy entry What you need to know: What is monopolistic competition? The definition is a “market structure having all conditions of pure competition except for identical products; a form of imperfect competition”

Monopolistic Competition RELIES HEAVILY ON ADS

But…

“Marshmallow Mateys” are NOT “Magically Delicious”

What you write: Pros: Incentives for firms to develop quality products Differentiation brings greater consumer choice and variety Cons: Wasteful- excess capacity because of too many competitors/ads

What you write: Oligopoly: Few sellers Products are practically the same (so buyers will make their decisions based on the lowest price) High barriers to entry What you need to know: What is an oligopoly? The definition is a “market structure in which a few large sellers dominate the market and have the ability to affect prices in the industry; form of imperfect competition”

Society benefits from oligopolies because sellers are so caught up beating each other that they improve the quality of their products/service

What you write: Pros: Oligopolies offer stable prices (because if one seller is too high, no consumer will buy from it) Cons: High barriers to entry because other sellers have so much access to other resources Special deals with suppliers will make it too expensive for new companies to start

Oligopolies can lead to: collusion and price-fixing

What you write: Monopoly: One seller = exclusive control Only one product (so buyers have no choice) Very high barriers to entry What you need to know: What is a monopoly? The definition is a “market structure characterized by a single producer; form of imperfect competition”

CONSUMER has almost no power

Monopolies can lead to: routinely bad serve and high prices

What you write: Pros: Saves resources (thereby helping the environment) Cons: Bad service with no incentive to change High prices

What you write: Draw a 6 x 5 table. Perfect Competition Monopolistic Competition OligopolyMonopoly Number of Sellers Huge Number of Sellers Big Number of Sellers FewOne Type of Substitute Products Products are Practically the Same Similar but Differentiated Very Good Differentiated No Good Substitutes Pricing PowerNoneLittle Little to Significant Significant Nature of Competition Price Only Marketing (Ads), Features, Price Advertising Barriers to Entry Easy Entry or Exit High Barriers Very High Barriers