2. Market Structure is the amount of competition in a particular market. 4 basic market structures in the American economy Perfect Competition Monopolistic competition Oligopoly monopoly

3. Perfect Competition These 4 conditions must be met for it to be perfect competition. 1. Large Market-many buyers and sellers 2. Nearly identical product 3. Easy entry and exit 4. Easily obtainable information Rarely exists in the real world.

4. Example:

5. Monopoly exists when a single seller controls the supply of a good or service and largely determines its price. Characteristics: A single seller No substitutes Barriers to entry (cost of getting started) Almost complete control of the market price

6. Examples: ESPN No other network is devoted to sports for 24 hours- broadcasts in 200 countries Monsanto Soybean and corn 98% of market in U.S.

7. 4 types of monopolies Natural (City bus service, cable, utilities- government grants exclusive rights) Geographic (country store) Technological (patent and copyrights) Patent- 20 years Copyrights- 70 years past death of writer Government (construction and maintenance of roads and bridges)

8. Oligopoly - dominated by several suppliers who exercise some control over price Characteristics: Domination by a few sellers Barriers to entry Identical or slightly different products Nonprice competition- advertising emphasizes minor differences Interdependence- one change will require a change with competition Examples- Car companies, kitchen appliances, airline travel

9. Economists would classify the top 3 as oligopolies.

10. Monopolistic Competition exists when a large number of sellers offer similar but slightly different products and each firm has some control over price. Most common in the U.S. Examples- toothpaste, make-up, clothes

11. Characteristics: Numerous sellers Relatively easy entry Differentiated products- advertising is important Nonprice competition Some control over price- building loyal customer base

12. Of the four basic market structures, perfect competition and monopolies are rare, while monopolistic competition and oligopolies are much more common.

13. Sherman Antitrust Act of 1890 Was passed because of John D. Rockefeller's monopoly with Standard Oil Was passed to prevent new monopolies or trusts from being formed and break up existing ones. Clayton Act -1914- passed to sharpen antitrust laws Most legislation deals with mergers

14. Mergers -two or more companies combine into one Horizontal Conglomerate Vertical