Suppose you want to start
a new business…
• Review the scenarios on the next slide,
and decide under which conditions you
would prefer to start your business.
• Give at least two reasons to justify your
The factors that influenced your
decisions are characteristics that
economists use to describe the level
of competition in markets.
Businesses behave differently depending
on the type of market structure in which
• Number of Firms: How many firms
produce this type of product?
• Type of Product: Do all competing firms
make products that are essentially the
same or specialized?
• Barriers to Entry: How easy it is for a firm
to enter the market (competition, start up
• Price Setting Power: How much control
does a firm have over the selling price of
• The four basic market structures are defined by
how competitive they are. Perfect competition is
the most competitive, with many producers
offering identical products.
• Monopoly lies at the other end of the spectrum
from perfect competition. A monopoly is a market
with one producer offering a product for which
there are no good substitutes. Examples include
the water, power, and cable TV industries.
• Monopolistic competition lies at the more
competitive end of the spectrum. It is a market
with many producers offering similar but slightly
different products. Examples include the shoe,
clothing, and restaurant industries.
• Oligopoly lies at the less competitive end of the
spectrum. It is a market with only a few
producers that offer similar or identical products.
Examples include the soft drink, aircraft, and
This is a graphic equation that illustrates the market
characteristics of the wheat industry in the 1990’s.
Let’s examine each piece of the equation.
What does this circle graph and written summary tell you about
the “number of producers” in the wheat industry?
What does this flowchart and written summary tell you
about the “similarity of products” in the wheat industry?
What does this illustration and written summary tell you
about the “ease of entry” into the wheat industry?
What does this graph and written summary tell you
about the “control over prices” in the wheat industry?
The question mark at the end of the equation indicates
that you must determine the market structure of the
industry by examining the four characteristics.
Which market structure best describes
the wheat industry in the 1990’s?
Problem Solving Groupwork
• Number off to form 8 groups.
• Each group will be assigned an industry case
study to analyze (Handout 7A).
• Each case study represents one of the three
types of imperfect market structures.
– Monopolistic Competition, Oligopoly, or Monopoly
• You will use the information from your notes
and chapter 7 to create a graphic equation for
your assigned industry.
Follow the procedures on Handout
7B to create a graphic equation for
• Have your teacher initial each of the following
steps as your group completes them:
– Step 1: Assign Roles
– Step 2: Learn about your assigned industry and
decide which market structure it exemplifies. DO
NOT REVEAL YOUR INDUSTRY’S MARKET
STRUCTURE TO OTHER GROUPS!
– Step 3: Brainstorm visuals for your graphic equation
and create a rough draft of your poster (on the back
of Handout 7B).
Make sure all visuals on the poster
specifically illustrate how each characteristic
functions in your particular industry!
• For “ease of entry into the market, you might draw one of these
–Step 4: Create your poster!
You will receive poster paper after you have
completed Step 3 and obtained your
Gallery Walk Instructions:
• As a class, fill in the first row of Handout 7C
about the wheat industry. Note that you are
only required to record information about two of
the four market characteristics.
Gallery Walk Instructions:
• Conduct a gallery walk to learn about other groups’
case studies and complete Handout 7C.
• When instructed, hang your group’s poster on the
wall and stand next to it.
• Begin the gallery walk by rotating to the poster to
the right of yours.
• You will have a 3-4 minutes to examine this poster
and take notes on Handout 7C.
• When the buzzer sounds, rotate again to the right.
• Repeat this process for the remaining posters.
1. Name one of the case studies.
2. What market characteristics and evidence did you record on
Handout 7C for this industry?
3. Based on the market characteristics, which market structure
does this industry exemplify?
4. The group that created this poster reveals the answer.
5. Repeat for the remaining case studies.