1. 7
Chapter
Competition

2. Competition=freedom to choose from several alternatives
Competition is about choice
It is the very basic principle of economics

3. Six Conditions of Competition
Number of buyers and sellers in the industry
Type of product produced (identical or unique)
Degree to which individual firms in the industry control price
Amount of information available to producers and consumers
Ease of entry and exit from the industry
Role of government

4. Perfect Competition: Good Example
thousands of firms, acting independently, turn out identical products for consumers.
Supply and demand work together to decide which goods and services will be produced and at what price
Rarely exists anywhere in the world.
1000s of buyers and sellers
Identical products
No control over price
Complete information
easy entry and exit
Small role of government
Good Example
not

5. Imperfect Competition
Monopolistic
Many sellers/buyers
Differentiated products
Limited control over price
Good access to information
Relative easy entry and exit
Small role of government
Oligopoly
Few firms
Differentiated or identical products
Greater influence on price
Limited information
Difficult entry and exit
Larger role of government

6. Monopolistic Competition
1. All firms produce similar yet not perfectly substitutable products.
2. All firms are able to enter the industry if the profits are attractive.
3. All firms are profit maximizers.
4. All firms have some market power, which means none are price takers.

7. Oligopoly
Similar to a monopoly, in which only one company exerts control over most of a market. In an oligopoly, there are at least two firms controlling the market.

8. No Competition: Monopoly
Characteristics of Monopoly:
One firm
Unique product
Control over price
Complete information
Extreme difficulty of entry and exit
Significant role of government

9. Sherman Antitrust Act
1890 the first measure passed by the U.S. Congress to prohibit abusive monopolies
1982 broke-up of the American Telephone and Telegraph (AT&T)
1998 attempted to rein in abusive monopolistic practices by Microsoft

10. Deregulation
Deregulation of the electric and natural gas markets came on the heels of deregulation in the airline and telephone industries.  Those industries underwent drastic changes during periods of expansion and contraction.  Today, airfare and phone rates adjusted-for-inflation, are considerably less than they were in the 1980s and many new products and services exist. 

14. O.S.H.A. Occupational Safety and Health Administration
Federal agency of the United States that regulates workplace safety and health

15. Cartel
Agreement among competing firms. It is a formal organization of producers that agree to coordinate prices through Collusion.
Organization of the Petroleum Exporting Countries (OPEC)
Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, & Venezuela
55% of oil traded worldwide

17. Types of Monopoly
Natural monopoly: single firm produces more efficiently than competing firms
(Ex: Electric Companies)
Government monopoly: government grants company a monopoly
(Ex: USPS, Garbage)
Technological monopoly: company patents/copyrights product to eliminate competition
(Ex: Pharmaceuticals, Computers)
Geographic monopoly: sole provider in a region
(Ex: Supermarkets in small towns) Internet primarily eliminated
Monopoly franchise: local government grants exclusive right to do business in an area
(Ex: Cable companies)

18. HW: Features of Various Market Structures
Number of Firms in Industry
Type of Product
Influence over Price
Amount of Information
Ease of Entry and exit
Role of Government
Perfect Competition
Thousands
identical
none
complete
easy
small
Monopolistic Competition
many
differentiated
Limited
considerable
Relatively
Oligopoly
12-50
Identical Or
limited
difficult
larger
Monopoly
one
unique
Extremely
significant
Market Structures