1. Pure Competition
Mr. Henry
AP Economics

2. Four Types of Markets
There are four types of market structures, each differing in several aspects:
Number of firms in the industry
Whether those firms produce a standardized product or try to differentiate their products from those of other firms
How easy or difficult it is for firms to enter the industry

3. Characteristics of the Four Basic Market Models

4. After looking at the characteristics of a pure monopoly, what examples can you think of for a pure monopoly?

5. After looking at the characteristics of an oligopoly, what examples can you think of for this? Note: Collusion is when firms “work” together

6. After looking at the characteristics of monopolistic competition, what examples can you think of?

7. After looking at the characteristics of pure competition, what examples can you think of?

8. Pure Competition Characteristics
Pure competition is relatively rare in the real world
Characteristics include:
Must be very large numbers of buyers and sellers
Must deal in identical products
Must act independently (must compete) and is a “price taker,” meaning it is at the mercy of the market and cannot ask for more money
Firms are free to enter into, conduct, or get out of business, so there are no significant obstacles

9. Demand as Seen by a Purely Competitive Seller

10. AP Review Questions A requirement of perfect competition is that
Many firms sell an identical product to many buyers
There are no restrictions on entry into (or exit from) the market, and established firms have no advantage over new firms
Buyers are well informed about prices
i only
i and ii
iii only
i and iii
i, ii, and iii
E. i, ii, and iii

11. B. The same as the demand curve
For a perfectly competitive corn grower in Nebraska, the marginal revenue curve is
Downward sloping
The same as the demand curve
Upward sloping
U-shaped
Vertical at the profit maximizing quantity of production
B. The same as the demand curve