1. Monopoly, Oligopoly, Monopolistic Competition
Chapter 9, Section 2

2. Monopoly
Monopoly – situation in which a single supplier makes up an entire industry for a good/service with no close substitutes. Ex. Local electric company.
Characteristics:
Single seller – only one seller exists for that product
No substitutes – no close subs for that good/service
No entry – protected by obstacles to competition that prevents others from entering that market.
Almost complete control of price – by controlling the availability of their product, they can control the market price for it.

3. Monopoly Cont… Types of Monopolies:
Natural Monopoly – Gov’t has given exclusive rights to a company. Ex. Utility providers, bus services, cable TV, etc.
Technological Monopoly – when you invent something, you can get a patent (exclusive rights to that invention) or a copyright (rights to sell literature, song lyrics, for the life of the author plus 70 years.)
Government Monopoly – like a natural monopoly but the gov’t holds this monopoly. Ex. Health care in Canada, construction and maintenance of roads, bridges, etc in America.
Geographic Monopoly – when a market’s profitability is limited due to its geographic location. Ex. Grocery store in remote part of Alaska.

4. Oligopoly
Oligopoly – industry dominated by a few suppliers who exercise some control over price. See page 244, figure 9.8

5. Oligopoly Characteristics:
Domination by a few sellers – few firms control 70-80% of market
Barriers to entry – high costs involved in starting business.
Identical or slightly different products – things like airline travel, cars, kitchen appliances.
Nonprice-competiton – ads emphasize the minor differences and attempts to build customer loyalty. Product differentiation (minor differences in quality and features to try to be different from competitors.)
Interdependence – a change by one company will cause the other companies to react by copying.
Cartel – arrangement between groups of businesses to reduce competition, allowing them to greater control prices of their products. Ex. Drug cartels in Mexico, South America.

6. Monopolistic Competition
Monopolistic competition – large number of sellers offer similar but slightly different products. Ex. Toothpaste, cosmetics, clothes.
Characteristics:
Numerous sellers – no single seller or small group dominates the market.
Relatively easy entry into that market
Differentiated products – each supplier sells a slightly different product.
Nonprice-competiton – businesses compete with each other by using product differentiation and by advertising.
Some control over price – by building customer loyalty they have some control over the price of their product.