Chapter 7 Market Structure Competition is a contest between individuals, groups, nations, animals, etc. for territory, a niche, or a location of resources. It arises whenever two or more parties strive for a goal which cannot be shared..

FYI Business is often associated with competition as most companies are in competition with at least one other firm over the same group of customers

Perfect Competition What Does Perfect Competition Mean? A market structure in which the following five criteria are met: 1. All firms sell an identical product. 2. All firms are price takers. 3. All firms have a relatively small market share.

PERFERCT COMPETITION 4. Buyers know the nature of the product being sold and the prices charged by each firm. 5. The industry is characterized by freedom of entry and exit. Sometimes referred to as "pure competition". Perfect Competition

Pure Competition Perfect competition is a theoretical market structure. It is primarily used as a benchmark against which other market structures are compared. The industry that best reflects perfect competition in real life is the agricultural industry.

Monopoly In economics, a monopoly exists when a specific individual or an enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it.

FYI (This is in contrast to a monopsony which relates to a single entity's control over a market to purchase a good or service.

FYI And contrasted with oligopoly where a few entities exert considerable influence over an industry)

FYI Monopolies are thus characterized by a lack of economic competition for the good or service that they provide and a lack of viable substitute goods

monopsony In economics, a monopsony is a market form in which only one buyer faces many sellers. It is an example of imperfect competition, similar to a monopoly, in which only one seller faces many buyers.

FYI As the only purchaser of a good or service, the "monopsonist" may dictate terms to its suppliers in the same manner that a monopolist controls the market for its buyers.

monopsony A single-payer universal health care system, in which the government is the only "buyer" of health care services, is an example of a monopsony.

FYI It has also been argued[2] that Wal-Mart, in the United States, functions as a monopsony in certain market segments, as its buying power for a given item may dwarf the remaining market. As well as food processing industries in relation to farmers.

PRODUCT DIFFERENTIATION What Does Product Differentiation Mean? A marketing process that showcases the differences between products. Differentiation looks to make a product more attractive by contrasting its unique qualities with other competing products. 

FYI Successful product differentiation creates a competitive advantage for the seller, as customers view these products as unique or superior.

PRODUCT DIFFERENTIATION Product differentiation can be achieved in many ways. It may be as simple as packaging the goods in a creative way, or as elaborate as incorporating new functional features.

FYI Sometimes differentiation does not involve changing the product at all, but creating a new advertising campaign or other sales promotions instead.

Natural Monopolies What Does Natural Monopoly Mean? A type of monopoly that exists as a result of the high fixed or start-up costs of operating a business in a particular industry. often regulate those in operation, ensuring that consumers get a fair deal.

FYI Because it is economically sensible to have certain natural monopolies, governments

Natural Monopolies The utilities industry is a good example of a natural monopoly. The costs of establishing a means to produce power and supply it to each household can be very large.

FYI This capital cost is a strong deterrent for possible competitors. Additionally, society can benefit from having natural monopolies because having multiple firms operating in such an industry is economically inefficient.

Product Differentiation What Does Product Differentiation Mean? A marketing process that showcases the differences between products. Differentiation looks to make a product more attractive by contrasting its unique qualities with other competing products. 

FYI Successful product differentiation creates a competitive advantage for the seller, as customers view these products as unique or superior.

Product Differentiation Product differentiation can be achieved in many ways. It may be as simple as packaging the goods in a creative way, or as elaborate as incorporating new functional features.

FYI Sometimes differentiation does not involve changing the product at all, but creating a new advertising campaign or other sales promotions instead.

MONOPOLISTIC COMPETITION What Does Monopolistic Competition Mean? A type of competition within an industry where: 1. All firms produce similar yet not perfectly substitutable products. 2. All firms are able to enter the industry if the profits are attractive.

FYI 3. All firms are profit maximizes. 4. All firms have some market power, which means none are price takers.

Monopolistic Competition Monopolistic competition differs from perfect competition in that production does not take place at the lowest possible cost. Because of this, firms are left with excess production capacity.

OLIGOLOPY What Does Oligopoly Mean? A situation in which a particular market is controlled by a small group of firms. An oligopoly is much like a monopoly, in which only one company exerts control over most of a market. In an oligopoly, there are at least two firms controlling the market.

FYI The retail gas market is a good example of an oligopoly because a small number of firms control a large majority of the market.

PATENTS & COPYRIGHTS What Is a Patent? A patent is an exclusive right granted to an inventor for a fixed period of time. A patent excludes others from making, using or selling the item in question for the duration of the patent's life.

FYI Once a patent has been granted to an inventor, he or she has the legal authority to prohibit others from making or selling the invention in the country where the patent was granted. Patent law was enacted by Congress, but in order to create a patent, inventions have to meet certain requirements:

Copyright What Does Copyright Mean? The ownership of intellectual property by the item's creator. Copyright law gives creators of original ideas, art, etc. the exclusive right to further develop them for a given amount of time, at which point the copyrighted item becomes public domain.

Copyright Copyright law states that a copyright stands for between 50 and 100 years from the creator's death if the creator is an individual, and a shorter time if the creator is a corporation. Copyrights can apply to many different products, including literary works, film, audio, drawings and software.