Tuesday, March 1, 2016 Objective: Students will be able to describe and give examples of perfect competition and monopolistic competition. Purpose: Understanding the structure of markets will make you a better consumer.

Pure Competition Pure Competition: a large number of firms all produce the same product and no single seller controls supply or prices All firms sell the same product for the same price The market is always in a state of equilibrium The market provides the buyer with full information about the features of the product and its price

Monopolistic Competition Has the same conditions as pure competition except for products being identical Products are very similar but have unique differences such as the brand name, colors, and quality of the product The word monopolistic the seller’s efforts to convince consumers that its product is unique enough to be worthy of a higher price.

Monopolistic Competition Large number of firms Characterized by product differentiation Mainly done through advertising Limited control over prices Easy to enter and exit the market

Oligopolies Oligopoly: a few firms dominate a market and have the ability to affect prices Less competitive than monopolistic competition Oligopolic firms are often very large and very similar in what they offer to consumers

Oligopolies Very difficult to enter the market Some advertising Expenses from nonprice competition are passed onto consumers, resulting in higher prices than in monopolistic competition Competition between Oligopolies Regularly release new versions of products