1. Perfect Competition Monopolistic Competition Oligopoly Monopoly
Market Structures
Perfect Competition
Monopolistic Competition
Oligopoly
Monopoly

2. Market Structures Perfect Competition Number of Sellers:
Monopolistic Competition
Oligopoly
Monopoly
Number of Sellers:
Are there many, few, or one seller(s) of the product?
The more sellers there are the more competitive the market is.
Barriers to Entry:
Are there any obstacles that prevent other firms from entering the market for the good?
If barriers are weak or absent from the market, the market will be more competitive.

3. Market Structures Price Control: Perfect Competition
Can individual firms in the market exercise any control over the price they charge?
The less control over price, the more competitive the market.
Product Differentiation:
Is there a difference between the products?
If the products are identical, there is no reason for sellers to engage in *non-price competition
*methods other than price used to attract customers.
Perfect Competition
Monopolistic Competition
Oligopoly
Monopoly

4. Market Structures Pure (Perfect) Competition
Large number of buyers and Sellers of an Identical Product.
Examples:
Crude oil and other commodities
Vegetables

5. Perfect Competition
A large number of buyers and sellers exchange identical products under five conditions.
A large number of buyers and sellers.
Products should be identical.
Buyers and sellers should act independently.
Buyers and sellers should be well-informed.
Buyers and sellers should be free to enter, conduct, or get out of business.

6. Market Structures Monopolistic Competition
large number of buyers and sellers of products that are similar to one another but can be differentiated by brand, quality, creativity, etc.
Examples:
Restaurants
Retail clothing and athletic shoes
Hotels

7. Monopolistic Competition
All conditions of perfect competition, except for identical products.
Product Differentiation
real or imagined differences between competing products in the same industry.
Non-Price Competition
to differentiate their products from similar products in the market.
sell within a narrow price range but try to raise the price within that range to achieve profit maximization.
Style, Branding, Celebrity or Athlete endorsement

8. Market Structures Oligopoly
Only a few sellers of a similar product who dominate the market.
Examples:
Wireless Communications Companies
Airlines
US Automakers
Soft Drinks

9. Oligopoly Pricing Behavior Firms act interdependently:
Price Leadership: Oligopolies know that when one firm lowers or raises prices, others soon follow.
Raising the price is risky. If a firm raises the price and the competition does not follow then they will lose money to the cheaper firms.
Example: Airline baggage fees, in-flight Wi-Fi
Typically prefer non-price competition because their rivals cannot respond as quickly.

10. Oligopoly Collusion When Oligopolies agree to set prices
illegal (because it restricts trade).
Two forms of collusion:
Price fixing, which is agreeing to charge a set price, which is often above market price.
Dividing up the market for guaranteed sales.

11. Market Structures Monopoly
Only one seller of a product that dominates the market (controls supply and prices) or a single producer of a specific product.
4 different Types
Natural
Geographic
Technical
Government

12. Monopolies
Natural Monopoly occurs when a single firm produces a product or provides a service because it has the ability to produce significantly more efficiently than potential competitors or has a significant head start in the market.
Google
YKK
Geographic Monopoly occurs when the location cannot support two or more such businesses.
single gas station on remote exit
small town drugstore or skating rink

13. Monopolies
Technological Monopoly occurs when a producer has the exclusive right through patents of copyrights to produce a product or sell a particular product.
medical drugs
Songs and Music
Unique Inventions
Government monopoly occurs when the government passes certain laws reserving the right for a specific trade.
Uranium Processing
Public Utilities