1. Perfect Competition vs. Monopoly To contrast perfect competition and monopolies

2. Perfect Competition Market in which numerous buyers and sellers are seeking to trade a similar product

3. Perfect Competition Market in which numerous buyers and sellers are seeking to trade a similar product In this case, the seller does not have complete control over the price

4. Perfect Competition Market in which numerous buyers and sellers are seeking to trade a similar product In this case, the seller does not have complete control over the price If a market is in perfect comp., then the producer must meet the price of other sellers

5. Perfect Competition Market in which numerous buyers and sellers are seeking to trade a similar product In this case, the seller does not have complete control over the price If a market is in perfect comp., then the producer must meet the price of other sellers The only way to increase profits is to lower the cost of production while still charging the same price (or increase the number of products sold)

6. Perfect Competition In order to be successful in a pc market, companies have to practice diversification

7. Perfect Competition In order to be successful in a pc market, companies have to practice diversification Diversification – increasing the types of products to lower fixed costs

8. Perfect Competition In order to be successful in a pc market, companies have to practice diversification Diversification – increasing the types of products to lower fixed costs May also be done to take advantage of other parts of the market that are not as competitive

9. Perfect Competition The Invisible Hand at work:

10. Perfect Competition The Invisible Hand at work: IF there are too many firms in a competitive market, profits will be low

11. Perfect Competition The Invisible Hand at work: IF there are too many firms in a competitive market, profits will be low Some firms would close

12. Perfect Competition The Invisible Hand at work: IF there are too many firms in a competitive market, profits will be low Some firms would close The fewer the firms in a competitive market, the more profit that can be made

13. Perfect Competition The Invisible Hand at work: IF there are too many firms in a competitive market, profits will be low Some firms would close The fewer the firms in a competitive market, the more profit that can be made The fewer the firms, the higher the price

14. Perfect Competition The Invisible Hand at work: IF there are too many firms in a competitive market, profits will be low Some firms would close The fewer the firms in a competitive market, the more profit that can be made The fewer the firms, the higher the price Generally in a competitive market, the consumer benefits

15. Perfect Competition The Invisible Hand at work: IF there are too many firms in a competitive market, profits will be low Some firms would close The fewer the firms in a competitive market, the more profit that can be made The fewer the firms, the higher the price Generally in a competitive market, the consumer benefits However, the cut prices, firms reduce services and quality (ex. Razor scooter)

16. Perfect Competition The Invisible Hand at work: There can be too many firms in a competitive market

17. Perfect Competition The Invisible Hand at work: There can be too many firms in a competitive market With little chance for profit, there may not be any $ for research and development of new better products

18. Perfect Competition The Invisible Hand at work: There can be too many firms in a competitive market With little chance for profit, there may not be any $ for research and development of new better products Highly competitive/low profit firms may not survive a down turn in the economy

19. Monopolies ® Perfect monopoly – a firm is the only supplier of a product

20. Monopolies ® Perfect monopoly – a firm is the only supplier of a product In a monopoly, a seller can charge as high of a price as they want

21. Monopolies ® Several factors to take into consideration:

22. Monopolies ® Several factors to take into consideration: The higher the price, the fewer number of people who could afford to purchase it

23. Monopolies ® Several factors to take into consideration: The higher the price, the fewer number of people who could afford to purchase it If prices are too high, it may encourage a competitor to enter the market

24. Monopolies ® Imperfect competition – have most of the control, but not all of the control in a market

25. Monopolies ® Three Types of imperfect markets:

26. Monopolies ® Three Types of imperfect markets: Monopolistic competition occurs when there are many producers of a similar product, all claiming that their product is best Ex. Shampoos, soaps, etc. (people will usually go with the well known name = Kleenex)

27. Monopolies ® Three Types of imperfect markets: Oligopoly occurs when there are very few producers of a product, allowing one to take charge

28. Monopolies ® Three Types of imperfect markets: Oligopoly occurs when there are very few producers of a product, allowing one to take charge Ex. The auto industry

29. Monopolies ® Three Types of imperfect markets: Natural Monopoly occurs when the product is very expensive to produce

30. Monopolies ® Three Types of imperfect markets: Natural Monopoly occurs when the product is very expensive to produce Ex. utilities