1. Chapter 7 Section 3

2. Markets can be grouped into 4 different basic structures :
1)Perfect competition
2) Monopolistic Competition
3) Oligopoly
4)Monopoly

3. *The two extremes in the range of market structures are Perfect Competition & Monopolies.
*The middle ground is provided by monopolistic competition and oligopolies.
Monopolistic Competition –a market structure in which many companies sell products that are similar but not identical .

4. The difference between Perfect Competition and Monopolistic Competition arise because Monopolistic Competitive firms sell goods that are similar enough to be substituted for one another but not identical .

5. Monopolistic Competition develops under four conditions :
Many Firms
Few Artificial Barriers to Entry
Slight Control Over Price
Differentiated Products

6. *2 to 4 firms that produce 70% or more of sales in a market
-Oligopoly-Describes a market dominated by a few large profitable firms.
*2 to 4 firms that produce 70% or more of sales in a market

7. -An oligopoly can form when significant barriers to entry keep new companies from entering the market to compete with existing firms.
-Sometime these barriers are created by a system of government licenses or patents.
-High start-up costs, such as expensive machinery or a large advertising campaign, can scare firms away from the market.

8. -Some oligopolies occur because of economies of scale
-Some oligopolies occur because of economies of scale. When a firm experiences economies of scale, the average cost of production decreases as output increases.
-In a market with a monopoly, only one company can produce enough goods to earn a significant profit. With oligopolies, perhaps 3 or 4 companies can reach a profitable level of output before the market gets crowded.

9. Nonprice Competition takes several different forms :
-Firms try not to compete on price alone . The alternative is Nonprice Competition , or competition through ways other than lower prices.
Nonprice Competition takes several different forms :
Physical Characteristics
Location
Service Level
Advertising , Image or Status .

10. What are the 4 conditions of Monopolistic Competition?

11. How do economist determine whether a market is an oligopoly ?

12. Give 3 examples of Nonprice competition .

13. How would price fixing and collusion help producers ?

14. Understand how firms compete without market set input .

15. Explain how firms compete without lowering prices .

16. Define oligopoly & 3 ways for firms in an oligopoly to control a market .

17. Would you describe the following markets as monopolistic competition or oligopoly ?
Refrigerators
Video games
Gourmet Ice Cream
Sunscreen
Cable Sports Channels

18. Why do firms in monopolistic competition have some control over prices ?