Economic Systems and Structures Unit 7

The Four Market Structures Part 1

Unwrap the Objectives Factual: Identify the four market structures Conceptual: Compare and contrast the four market structures Communicative: Categorize the four market structures

Agenda Unwrap the Objective Lecture Notes Video Questions Chart It Out Check It Out Essential Question

Essential Question If you were a business owner, what market structure would you prefer? If you were a consumer, what structure would you prefer?

The Four Market Structures Part 1

Video Questions https://www.youtube.com/watch?v=Sb_-wfmJnHA According to the video what is a pure monopoly? According to the video why are laws against Monopolies called anti trust laws? According to the video what is horizontal integration? According to the video what is vertical integration? According to the video how long do most patens last? According to the video what is a natural monopoly? According to the video what is price discrimination?

Video Questions According to the video what is a pure monopoly? A Market controlled by one seller with a good or service that has no close substitutes According to the video why are laws against Monopolies called anti trust laws? Monopolies used to be called trusts According to the video what is horizontal integration? The Act of buying companies that produce similar products According to the video what is vertical integration? When a company directly owns or controls its supply chain According to the video how long do most patens last? 20 years According to the video what is a natural monopoly? When it is more cost effective to have one large producer rather than several smaller competing firms According to the video what is price discrimination? Charging different people different prices for the same product or service

Perfect Competition Occurs when there are many sellers There is easy entry and exiting of firms Products are identical from one seller to another Sellers are price takers. A company that must accept the prevailing prices in the market of its products The company is unable to affect the market price.

Perfect Competition Continued Size of market Companies have little control over market because they only own a small part of it Easy of Entry It is very easy to enter or exit Similarity of products Products are the same in a market Control of price Firms have to charge what people or willing to pay even a few cents will cost them all business

Monopolistic Competition Occurs when there are there are many firms that offer similar products There is easy entry and exiting of firms Products are nearly identical from one seller to another Sellers are price setters The firms or companies set prices. Companies are able to do this because of uninformed consumers not knowing how the small changes in the product should impact the price

Monopolistic Competition Continued Size of market Companies have little control over market because they only own a small part of it Easy of Entry It is very easy to enter or exit Similarity of products Products are nearly the same in a market Control of price Firms set prices for products but often have sales to draw attention to their product

Oligopoly Is when there are few firms in a market and they are able to act like a monopoly Prices are set by a price leader A firm that is followed by others when it changes the price New firms need lots of capital to enter the market

Oligopoly Continued Size of market Companies have a lot of control over market because there are only a few firms in the market No firm has complete control of the market Easy of Entry It is difficult to enter the market because the other firms have so much control Similarity of products Products are nearly the same in a market Control of price Firms set prices for products like a monopoly When a price leader changes prices the other firms follow

Monopoly Is when a market is controlled by a single firm That firm is able to block other firms from entering the market by controlling prices or materials People must purchase goods from the single source are do without

Monopoly Size of market Easy of Entry Similarity of products A single firm has complete control over the market Easy of Entry It is almost impossible to enter the market Similarity of products Products are the same in a market Control of price A firm sets prices for products

Chart It Out Place the following examples (letter only) on line where they belong Nike and basketball shoes Entergy in Tangipahoa Parish Burger king Google A new car manufacturer Monopoly Perfect Competition

Check It Out In the Space provided describe each market’s control of the four categories. Size of Market Ease of entry Similarity of Product Control over Price Perfect Competition Monopolistic Competition Oligopoly Monopoly