2. A market structure is the nature and degree of competition among the firms operating in the same industry. There are four different market structures….

3. 1. Perfect Competition *Perfect Competition is characterized by a large number of informed independent buyers and sellers who exchange identical products. *In a perfect competition there are five major conditions that characterize a competitive market.

4. 1.Buyers and sellers deal with identical products with no difference in quality and no need for brand names. 2.There are a large number of buyers and sellers but there is not a buyer or seller large enough to affect the price.

5. 3Each buyer and seller acts independently. This insures that sellers compete against each other for the consumers dollar and that the consumers compete against each other to obtain the best price. 4 Buyers and sellers are reasonably well informed about products and prices in which buyers shop at the stores with the lowest prices and sellers match the lowest price of the competitor.

6. 5. Buyers and sellers are free to enter into, conduct, or get of the business.

7. 2. Monopolistic Competition Monopolistic Competition has the same conditions as the perfect competition except for identical products. By making the products a little different the monopolistic competitor tries to attract more customers.

8. Key Words Product Differentiation is when real or imagined differences between competing products are in the same industry. Non-price competition is the use of advertising, giveaways, or other promotional campaigns to convince buyers that the product is better than other brand.

9. 3. Oligopoly Oligopoly is the market structure in which few very large sellers dominate the industry. In the U.S. many markets are already oligopolistic such as Pepsi and Coke, Burger King and Wendy’s.

10. Key Terms Collusion is a formal agreement to set prices or to otherwise behave in a cooperative manner. A form of collusion is price fixing which is agreeing to charge the same or similar prices for a product.

11. 4. Monopoly A monopoly is a market structure with only one seller of a particular product. The American economy has very few monopolies because new technology often offers new products that compete with existing products.

12. Types of Monopolies… Natural Monopoly is a market situation where the costs of production is minimized by having a single firm produce the product. Geographic Monopoly is a monopoly based on the absence of other sellers in a certain geographic area.

13. Technological Monopoly – a monopoly that is based on ownership or control of a manufactory method. Government Monopoly – a monopoly that the government owns and operates.