SSE14 – Students will explain the Characteristics of Pure Competition You have to --- –Know what pure competition is. –Understand How it works. Buyers view Suppliers view Interacting with previous learning such as marginal costs, supply & demand, etc. –Be able to integrate concepts & goals between supplier & consumer.

Amount of demand Amount Supplied PERFECT COMPETITION EQUALIBRIUM

Perfect (Pure) Competition The simplest market structure is called perfect competition. –A perfectly competitive market is one with a large number of firms producing the same product. –Perfect Competition assumes equilibrium that all firms sell the same product. No single firm can hope to influence price.

Four conditions for Perfect Competition –Many Buyers & sellers participate in the market No one individual can powerful enough to buy or sell enough goods to influence the total market. –At & T created a monopoly. Market determines prices influenced only by The Invisible Hand. –Identical Products – there are no differences between products sold by different suppliers. Products that is considered the same are called commodities.

–Identical Products – there are no differences between products sold by different suppliers. Products that is considered the same are called commodities. Low-grade gasoline, milk, notebook paper are considered commodities because a buyer will not pay extra. –Informed buyers & Sellers – buyers are provided with full information about the features of a product and its price. –Free Market Entry & Exit – sellers can get in and out at will Making money they can stay. Losing money they can quit. Whatever.

Barriers to Entry –Start up costs – when costs are high new firms wont enter the market. –Technology- Know how Technical skills (example: opening up a counseling practice) –Price Output- Capital Human capitol

MONOPOLIES A Monopoly is a market dominated by a single seller. –A monopoly is formed when barriers prevent firms from entering the market that has a single supplier. Microsoft windows New medicine (Tylenol) Forming a Monopoly – –Economies of Scale – Factors that cause a firms average cost per unit to decrease as output rises. –

Forming a Monopoly – –Economies of Scale – Factors that cause a firms average cost per unit to decrease as output rises. EXAMPLE – if it costs $ to open a bakery, to set up, and to pay an individual then if the first cake costs to make the initial cost is $ If every cake costs $10.00 to make the start up cost plus the cost of the cake is averaged over each cake made. If the bakery makes 50 cakes at $10 / cake = $ $ /50 = $ It becomes cheaper and cheaper for the company to produce that good. In the long run that company can operate cheaper and more efficiently than another company trying to get into the business.

Forming a Monopoly – –Economies of Scale – Factors that cause a firms average cost per unit to decrease as output rises. It becomes cheaper and cheaper for the company to produce that good. In the long run that company can operate cheaper and more efficiently than another company trying to get into the business. –A Natural monopoly – is one where the market runs more efficiently when one large firm provides all the output. (Georgia Power)

Technology & Change – The development of new technology can allow smaller entrepreneurs to enter into the market with less start up cost. –Examples – internet retail Printing Companies / computers