Market Structures CH. 7 9R

Sec. 1 Competition and Market Structures As: Name a popular brand of shoes or clothing that you simply must have. Can you name several competing brands that you consider poor substitutes? If so product differentiation exists and you will pay more because of it.

PERFECT COMPETITION I. Perfect Competition- includes independent and well informed buyers and sellers of exactly the same economic product. Ex: Farm to market in San Clemente

I. Conditions for Perfect Competition: A. Conditions for perfect competition 1. Large numbers of buyers and sellers exist. 2. Buyers and sellers deal in identical products. 3. Each buyer and seller acts independently. 4. Buyers and sellers are reasonably well informed. 5. Buyers and sellers are free to enter into conduct, or get out of business.

Monopolistic Competition: A. Product differentiation- The difference between Monopolistic competition and perfect competition is product differentiation. (Although the product could be similar it is not identical)

Monopolistic Competition: II. Monopolistic competition- making its product a little different, the monopolistic competitor tries to attract more customers and monopolize small portion of market. Example: Netflix

Monopolistic Competition: B. Non-price Competition: This happens when advertising or other promotional campaigns try to convince you their product is better. Example: Apple commercials C. Profit Maximization: If the advertising worked they can charge a high price for the product if not the price goes down. Example: What would be an example of something that failed as a commercial.

Oligopoly III. Oligopoly: Where a few large sellers of a product dominate. Example: Pepsi, Coke, McDonalds, Burger King, Airline Industry, Auto Industry Telephone service. A. Interdependent Behavior: Collusion: a formal agreement to set prices or behave in a cooperative manner. AKA: Price fixing Example: Surf stores, wetsuits, clothes in general.

Monopoly IV. Monopoly: Market situation with only 1 seller and with no substitutions. A. Natural Monopoly: a market situation where costs are minimized by having a single firm produce a product. Example: water services and electricity

Monopoly B. Geographic Monopoly: A monopoly simply because of its location. Example: You live in a little town and there is only one liquor store. Is this a geographic monopoly? C. Technological Monopoly: An individual has discovered a new manufacturing technique. Example: Wetsuits: O’Neil with liquid seam contract on repair. Govt. grants a patent.

CRASH COURSE EPISODE 19 3 bullet point notes

THE TASTE TEST Demonstrations: Product differentiation Blind Taste test of colas Name your favorite brand and why you like it? Is it the taste? Aroma? Color? Do these 2 soda makers represent all four types of businesses?

The Role of Government: Section 3 1. Antitrust Legislation: The breaking up of monopolies. In 1890 Congress passed the Sherman Antitrust Act. 2. Government Regulation: The govt. tries to regulate monopolies for the benefit of public. IE: Water or electricity. 3. Public Disclosure: To provide market with enough data to prevent market failures due to inadequate info. IE: stock disclosures about companies. 4. Indirect Disclosure: Government has agreed to improve quality of information. IE: Internet for all. 5. Modified Free Enterprise: Government steps in to protect the consumer. OUR GOVERNMENT DOES NOT LIKE MONOPOLIES

FREE ENTERPRISE ACTIVITY Each of you will be on a team of 10 today and your team will be responsible for researching the following question: Does the Government have too much regulatory power? Each group will be given 20 minutes to prepare and then will have 3-4 people come up on a panel and debate the issue. Teams will get opening statements and closing statements. Please remember to be respectful and use your phone and book to research.

3 2 1 COMPLETE THIS IN YOUR NOTES 3 things you learned today Two questions you have One thing you found interesting

Closing thoughts Project due Monday June 5 by 1:50pm. Late deductions will be applied EACH GROUP MEMBER NEEDS TO PRESENT HIS/HER PORTION OF THE PRESENTATION. REHEARSE!

Feeling Circle