1. Answer all questions in full sentences.
How does competition affect markets? Suppose you walked into a store selling running shoes. For each example below, briefly describe the variety and quantity of running shoes you would expect to find and the prices of the shoes.
This store is one of eight independent stores selling running shoes in the city.
This store is one of three stores selling running shoes in the city, but all three owners secretly work together to increase their profits.
This store is the only one selling running shoes in the entire city.
Then answer this question: Should the government take action to ensure that the highest level of competition exists in every market? Why or why not?
Bell ringer 10/07
Answer all questions in full sentences.

2. 4 Market Structures
Perfect Competition: a market structure in which a large number of firms all produce the same product & no single seller controls supply or price
Monopolistic Competition: market structure in which many companies sell products that are similar but not identical
Oligopoly: Market structure in which a few large firms dominate a market
Monopoly: Market in which a single seller dominates

3. In your group, create a poster that you can use to teach your market structure to the class. Be sure to include:
Barriers to entry?
Variety of goods?
How many firms?
Control over prices?
Examples

4. Natural Monopolies
A market that runs most efficiently when one large firm provides all of the output
If a second firm entered, competition would drive down the market price & decrease quantity each firm could sell
They won’t be able to cover their costs
One or both will go out of business
Ex.?

5. Natural Monopolies
A market that runs most efficiently when one large firm provides all of the output
If a second firm entered, competition would drive down the market price & decrease quantity each firm could sell
They won’t be able to cover
their costs
One or both will go out of
business
Ex. Public water

6. Government Monopolies
A monopoly created by
the government
Patent: gives a company exclusive right to sell a new good or service for a specific period of time
Franchise: Contract issued by a local authority that gives a single firm the right to sell its goods within an exclusive market

7. Division of consumers into groups based on how much they will pay for a good
Price Discrimination

8. Might not buy it otherwise
Price Discrimination
Targeted discounts
Senior citizens
Student
Might not buy it otherwise