1. 4 Market Structures
Candy Markets Simulation

2. FOUR MARKET STRUCTURES
Perfect
Competition
Monopolistic
Competition
Pure
Monopoly
Oligopoly
Every product is sold in a market that can be considered one of the above market structures.
For example:
Fast Food Market
The Market for Cars
Market for Operating Systems (Microsoft)
Strawberry Market
Cereal Market
Monopolistic Competition (differentiated products)
Oligopoly
Monopoly
Perfect Competition
Oligopoly (3 main producers)

3. Perfect Competition

4. Characteristics of Perfect Competition
Many small firms.
Nothing prevents competition
Sellers offer identical products
Buyers have many choices.
Competitors are offering perfect substitutes.
Seller has no need to advertise.

5. Characteristics of Perfect Competition
4. Easy access in or out of the industries
Firms enter the market seeking short-term profits, and exit because there are no long-term profits.
5. Businesses are “Price Takers”
If a firm charges above the market price,
NO ONE will buy. They will go to other firms
There is no reason to price low because consumers will buy just as much at the market price.

6. Perfectly Competitive Firms
Example:
Say you go to Mexico to buy a hammock.
After visiting at few different shops you find that the buyers and sellers always agree on $15.
This is the market price (where demand and supply meet)
Is it likely that any shop can sell hammocks for $20?
Is it likely that any shop will sell hammocks for $10?
What happens if a shop prices hammocks too high?
Do you think that these firms make a large profit off of hammocks? Why?
These firms are “price takers” because the sell their products at a price set by the market.

7. Perfect Competition
There are very few markets that are truly Perfect Competition:
The Agricultural Markets can be very close to Perfect Markets 7

8. Monopolistic Competition

9. Monopolistic Competition
Examples:
Fast Food Restaurants
Furniture companies
Jewelry stores
Hair Salons
Clothing Manufacturers

10. Characteristics of Monopolistic Competition:
Perfect
Competition
Monopolistic
Competition
Monopolistic
Competition
Pure
Monopoly
Pure
Monopoly
Oligopoly
Oligopoly
Characteristics of Monopolistic Competition:
Relatively Large Number of Sellers
Differentiated Products
Sellers point out the differences (both real and imagined) that makes their product stand out.

14. Characteristics of Monopolistic Competition:
Perfect
Competition
Monopolistic
Competition
Monopolistic
Competition
Pure
Monopoly
Pure
Monopoly
Oligopoly
Oligopoly
Characteristics of Monopolistic Competition:
3. Some control over price
4. Easy Entry and Exit (Low Barriers)
5. A lot of non-price competition Companies often use advertising to influence consumers their way.

15. Monopolistic Competition
Profits
Companies use:
product differentiation and
non-price competition
to maximize their goal of increased profits, but much like perfectly competitive firms these don’t see long-term profits.

16. Differentiated Products16