1.How do you face competition in your daily life? 2.How does competition apply to economics in a positive and a negative way? 1.How do you face competition in your daily life? 2.How does competition apply to economics in a positive and a negative way?

What kind of markets do you encounter?

The number of firms in the industry The firm’s level of market power The degree of production differentiation between good offered by different firms The ease of exit and entry

Many buyers and sellers in the market Goods offered by various sellers are the same Firms easily enter and exit the market Buyers and sellers are well informed, little influence over supply

Many buyers and sellers in the market, though not as many firms as perfect competition Relatively low barriers of entry Products are not all the same (differentiation of packaging, service, quality, etc.) Mini-monopolies…some control over price

Handful of large firms dominate a market Products are similar but with slight differences High barriers to entry keep new firms out Because of high control of the market there is temptation to collude but also to cheat

Single seller in a market High barriers to entry prevent competition

Single firm controls key resource Government grants exclusive operating rights Patent and Copyright System Natural Monopolies – Economies of Scale

One firm dominates the market Price is only constrained by consumer demand No substitute High barriers to entry exist

Perfect Competition Pure Monopoly Monopolistic Competition Oligopoly