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Market Structures. Definition Nature and degree of competition among firms operating in the same industry Nature and degree of competition among firms.

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Presentation on theme: "Market Structures. Definition Nature and degree of competition among firms operating in the same industry Nature and degree of competition among firms."— Presentation transcript:

1 Market Structures

2 Definition Nature and degree of competition among firms operating in the same industry Nature and degree of competition among firms operating in the same industry 4 types: Perfect Competition, Monopoly, Monopolistic Competition, Oligopoly 4 types: Perfect Competition, Monopoly, Monopolistic Competition, Oligopoly

3 To be perfectly competitive … There must be a large number of buyers and sellers. There must be a large number of buyers and sellers. All sellers have an identical product. All sellers have an identical product. Everyone acts independently (no one makes secret agreements). Everyone acts independently (no one makes secret agreements). Everyone is well-informed about the product. Everyone is well-informed about the product. Buyers and sellers are free to enter and exit the market as they choose. Buyers and sellers are free to enter and exit the market as they choose.

4 More about perfect competition All sellers sell at the same price. All sellers sell at the same price. No seller receives a profit. Why? No seller receives a profit. Why? Example: Apple Market we did in class, or any produce market would be the closest to perfect competition. Example: Apple Market we did in class, or any produce market would be the closest to perfect competition.

5 To be a monopoly … There can only be one seller. There can only be one seller. It is almost impossible to enter or exit the market. It is almost impossible to enter or exit the market. The seller has extensive control over the price. The seller has extensive control over the price.

6 More on Monopoly Monopolists receive profit. Monopolists receive profit. 4 types of monopolies: 4 types of monopolies: 1. Natural: public utilities fall under this because they are cheaper to act as one unit then have several companies 2. Geographic: a gas station in the middle of nowhere 3. Technological: patents, copyrights 4. Government:

7 Monopolistic Competition All conditions of perfect competition except for identical product. All conditions of perfect competition except for identical product. Must attract competition by product differentiation and nonprice competition. Must attract competition by product differentiation and nonprice competition. An example would be different clothing stores. An example would be different clothing stores. Very little to no profit exists because entry and exit are so easy. Very little to no profit exists because entry and exit are so easy.

8 Oligopoly Few large sellers dominate the market. Few large sellers dominate the market. Similar to monopoly, but has a few sellers instead of just one. Similar to monopoly, but has a few sellers instead of just one. Behavior of one company determines behavior of others. Behavior of one company determines behavior of others. Oligopolies collude (which is illegal in US). Oligopolies collude (which is illegal in US). Can have a profit, but not as much as monopoly. Can have a profit, but not as much as monopoly.

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