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Published byMarcel Hoston Modified over 10 years ago
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Clarifications 1. Stock Project 1 st period only- basic chart http://finance.yahoo.com/ 2. Liability: legally bound obligation to pay debt— debts can ruin a sole proprietorship's business—sell car to pay loan 3.2 nd period: pure competition—go over again
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Market Structures
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Price Leadership: 1 co. lowers price and others follow (Southwest Airlines)—exists in oligopolies Price Collusion: companies get together set prices—hard to prove (ex: airline company and FBI tapes) Price fixing: agreement among firms to sell at the same or similar prices—result of price collusion
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Pure/Perfect Competition A large number of firms all producing (essentially) the same product Sell same product at the same price- identical product Farming, some agricultural produce, stock market No price setting power and no non-price competition 4 requirements: –Many buyers and sellers –Identical products –well informed about products –Sellers can enter and exit market freely
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Imperfect Competition Factors make it difficult for new firms to enter market = barriers to entry Leads to imperfect competition
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Product Differentiation Emphasis on subtle differences between competing products Profit from the differences Features of package or product Convenience Aspirin or Bayer Non-Price Competition (advertising): Physical characteristics: new size, color, bottle shape Location- where they are sold Service Level: higher level of service Advertising: create apparent differences
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Monopolistic Competition sell products that are similar but not identical- (Aisles at grocery store) More difficult to enter market Some price setting power (name brand loyalty) Non-price competition exists Sodas, grocery products, bottled H2O, dry cleaners, shampoo/conditioner, burger joints 4 requirements: Many firms/sellers Few artificial barriers Slight control over price Differentiated products
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Monopoly barriers prevent firms from entering market that has one single supplier 1 seller and any number of buyers (same price) Unique product Impossible to enter market Total price setting power –ATT/ electricity co’s or utilities/ MUD districts/ Center Point energy/Bill Gates/cable
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4 types of Monopolies Technical: new technology develops Natural: natural gas, electricity, MUD, Center Point, cable, Government: created by government Geographic: Location Price discrimination: sell a product to groups of consumers for different prices
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Oligopoly 3-5 firms dominate industry Identical and different products Very difficult to enter market—need lots of money Prices are interdependent Non-Price competition exists Big 3 auto makers, Beer, cigarettes, sodas, cereal, TXU, Reliant, Direct electricity, Center Point, television service providers (ATT, direct)
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Terms Patent: government issues a patent to a company giving exclusive rights to sell a new good or service (for a specific period of time) Price war: when competitors cut prices very low to win business—harmful to producers but good for consumers Cartels: illegal in US– producers coordinate prices and production
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