2. Market Structures

3. What is the primary aim/goal of businesses? –To maximize profits What is competition? –Striving against others to reach an objective

4. 4 Types of Market Structure 1. Pure/Perfect Competition –Large number of buyers and sellers –Identical product –Well informed buyers and sellers –Price Takers! –Low barriers for entry/exit More CompetitionLess Competition

5. Pure/Perfecct Competition Many buyer/sellers + Identical Products

6. Perfect Competition 12345

7. Imperfect Competition Most USA markets are imperfect competition Most USA markets are imperfect competition Farming is perfectly competitive. Farming is perfectly competitive. A market is imperfect when it lacks one or more of the characteristics of Perfect Competition A market is imperfect when it lacks one or more of the characteristics of Perfect Competition

8. Forms of Imperfect Competition Monopolistic competition Monopolistic competition –Large # of Buyers and sellers –Product Differentiation –Non Price Competition –Most markets in USA are monopolistic competition

9. Monopolistic Competition Meets all condition of perfect competition except for identical products. Meets all condition of perfect competition except for identical products. –Product differentiation Monopolistic competitors use nonprice competition Monopolistic competitors use nonprice competition –Advertising, giveaways, or other promotions More CompetitionLess Competition

10. What are some examples?

11. Monopolistic Competition Same as pure competition except for product differentiation Gap Levis Lucky

12. Review Classify each product as perfect comp (pc) or monopolistic comp (mc) Classify each product as perfect comp (pc) or monopolistic comp (mc) –Toothpaste –Wheat –Coal –Books –CDs –Computer software –http://www.youtube.com/watch?v=9Hxy- TuX9fs&feature=related http://www.youtube.com/watch?v=9Hxy- TuX9fs&feature=relatedhttp://www.youtube.com/watch?v=9Hxy- TuX9fs&feature=related

13. Oligopoly A few very large sellers dominate the industry A few very large sellers dominate the industry Oligopolists act independently by lowering prices soon after the first seller announces the cut Oligopolists act independently by lowering prices soon after the first seller announces the cut Collusion: formally agree to set prices Collusion: formally agree to set prices Heterogeneous products Heterogeneous products Engage in price wars Engage in price wars High barriers to entry High barriers to entry More CompetitionLess Competition

14. What are some examples?

15. Oligopoly Few producers control supply and price

16. Coca-Cola Classic Coca-Cola classic Coca-Cola classic Sprite Sprite Dasani Dasani Barq's Barq's Dannon Dannon Nestea Nestea Rockstar Rockstar Evian Evian Fanta Fanta Fresca Fresca Minute Maid Minute Maid Mr. Pibb Mr. Pibb Powerade Powerade Seagrams Ginger Ale & Mixers Seagrams Ginger Ale & Mixers TAB TAB

17. Pepsi-co Aquafina Aquafina Pepsi Pepsi Mountain Dew Mountain Dew Sierra Mist Sierra Mist Sobe Sobe Lipton Brisk Tea Lipton Brisk Tea MUG Root Beer MUG Root Beer Slice Slice Gatorade Gatorade Dole Juice Dole Juice Tropicana Tropicana

18. Cadbury Schweppes 7 Up 7 Up Canada Dry Canada Dry Clamato Clamato Dr Pepper Dr Pepper Hawaiian Hawaiian Punch Punch Mott's Mott's Orangina Orangina Snapple Snapple

19. Toyota Toyota Toyota Scion Scion Lexus Lexus

20. Chrysler Chrysler Chrysler Jeep Jeep Dodge Dodge

21. General Motors Chevrolet Chevrolet Buick Buick Pontiac Pontiac GMC GMC Saturn Saturn Hummer Hummer SAAB SAAB Cadillac Cadillac

22. What is missing?

23. Monopoly Only one seller of a particular product Only one seller of a particular product Few monopolies Few monopolies

24. Monopoly More CompetitionLess Competition One seller dominates the market with no close substitutes One seller dominates the market with no close substitutes Sets prices Sets prices High barriers High barriers

25. Monopoly Natural Monopoly - efficient production by a single supplier Natural Monopoly - efficient production by a single supplier

26. Monopoly Geographic Monopoly - small town Geographic Monopoly - small town

27. Technological Monopoly  In order for the inventor to make money and keep new ideas flowing –Patients on inventions

28. Government Monopoly  It is a product that the government should provide because they are the government –National defense, disposal of nuclear materials

29. Market Failures Inadequate Competition Inadequate Competition –Lack of competition which causes either buyers or sellers to control the market Inadequate Information Inadequate Information –Consumers or producers lack enough information about a market to allow it to work properly Externalities Externalities –Unintended positive or negative side-effects to a 3 rd party because of a market transaction  What are some examples?  http://www.youtube.com/watch?v=DOuBxJNIFkY&feature=related http://www.youtube.com/watch?v=DOuBxJNIFkY&feature=related Public Goods Public Goods –Goods used by all and directly paid for by none  What are some examples?

30. Sherman Antitrust Act 1890 Clayton Antitrust Act 1914 Federal Trade Commission Act 1914 Robinson- Patman Act 1936 Federal Antitrust Legislation

31. 4 Ways the Government regulates businesses 1- Anti-trusts Laws 1- Anti-trusts Laws 2- Non-discrimination laws 2- Non-discrimination laws 3-Public Disclosure 3-Public Disclosure 4-Federal Agencies p. 180 4-Federal Agencies p. 180

32. 3-2-1 3 things you learned 3 things you learned 2 things you want to learn more about 2 things you want to learn more about 1 question 1 question