Market Structures CHAPTER 6 SECTION 1: Highly Competitive Markets Holt Economics 4/15/2017 CHAPTER 6 Market Structures SECTION 1: Highly Competitive Markets SECTION 2: Imperfectly Competitive Markets SECTION 3: Market Regulation Chapter 6

Objectives: Highly Competitive Markets SECTION 1 What is perfect (pure) competition? What is monopolistic competition? How do sellers differentiate their products under monopolistic competition?

SECTION 1 Highly Competitive Markets Perfect (pure) competition is a market structure in which buyers and sellers each compete directly and completely under the laws of supply and demand.

SECTION 1 Highly Competitive Markets Monopolistic competition is a market structure in which producers sell different rather than identical products.

SECTION 1 Highly Competitive Markets Sellers differentiate their products under monopolistic competition through nonprice competition, such as advertising.

Objectives: SECTION 2 How is an oligopoly structured? Imperfectly Competitive Markets Objectives: How is an oligopoly structured? What is a monopoly? What types of monopolies exist? What factors affect prices in oligopolies and monopolies?

Structure of an oligopoly: SECTION 2 Imperfectly Competitive Markets Structure of an oligopoly: only a few large sellers, and they control most of the production of a product sellers offer identical or similar products new sellers find market entry difficult

Characteristics of a monopoly: SECTION 2 Imperfectly Competitive Markets Characteristics of a monopoly: one seller no close substitute goods difficult to enter market

Types of monopolies: SECTION 2 Imperfectly Competitive Markets Types of monopolies: natural monopolies—one large seller produces a good or service most efficiently geographic monopolies—isolated geographic location attracts only one seller technological monopolies—one producer owns the technology that created the market government monopolies—government is the sole seller of a product

Factors that affect prices in oligopolies and monopolies: SECTION 2 Imperfectly Competitive Markets Factors that affect prices in oligopolies and monopolies: consumer demand potential competition government regulation

Objectives: Market Regulation SECTION 3 What was the relationship between the U.S. government and business before the 1880s? What was the purpose of early antitrust legislation? How has the government enforced antitrust legislation?

Laissez-faire relationship between the federal government and business SECTION 3 Market Regulation Laissez-faire relationship between the federal government and business Before the 1880s, the U.S. government did not interfere with business or the marketplace.

Purpose of early antitrust legislation: SECTION 3 Market Regulation Purpose of early antitrust legislation: to monitor and regulate big business to prevent formation of monopolies to break up existing monopolies

Government enforcement of antitrust legislation: SECTION 3 Market Regulation Government enforcement of antitrust legislation: broke up Standard Oil Company of Ohio in 1911 and AT&T in 1982 with the Sherman Antitrust Act created watchdog groups, such as the Interstate Commerce Commission and the Federal Trade Commission strengthened antitrust legislation with acts such as the Celler-Kefauver Act of 1950, the Antitrust Procedures and Penalties Act of 1975, and the Parens Patriae Act of 1976

CHAPTER 6 Wrap-Up 1. How does perfect competition differ from monopolistic competition? Give an example of each. 2. How are oligopolies different from monopolies? 3. How does a cartel operate? Why are cartels illegal in the United States? 4. How do oligopolies and monopolies affect product choice and price? 5. What factors encouraged the U.S. government to abandon its laissez-faire economic policies in the 1880s?