Pe business organization & market structure student
1. Unit #3 (Part 2) Competition & Business Organization PRACTICAL ECONOMICS
2. Market Structure Market Structure – the organization of a market that is based upon the degree of competition among businesses 4 TYPES OF COMPETITION Perfect (Pure) Competition Monopolistic Competition Oligopoly Monopoly
3. #1 Perfect Competition - A market where a large number of firms produce essentially the same product Five conditions that must be met: 1. A large market 2. A similar product 3. Easy entry and exit 4. Easily obtainable information 5. Independence **IMPORTANT – These firms have NO CONTROL OVER PRICE!!**
9. 5. Some control over price!IMPORTANT – *If these competitors can make you buy into their “brand”, they can raise their prices within a narrow range*
10. REVIEW MOST COMPETITIVE BIGGEST # OF FIRMS MANY FIRMS NO CONTROL OVER PRICE SOME CONTROL OVER PRICE
11. #3 Oligopoly A market where a few firms produce similar or identical products Conditions -1. Domination by a Few Sellers - 2. Barriers to entry -3. Identical or Slightly Different Products -4. Nonprice competition -5. Interdependence Collusion (ex. Price Fixing)– BAD for Consumers Price Wars – GOOD for Consumers **IMPORTANT – Each firm has the ability to cause a change in output, sales, & prices of entire industry!!**
12. #4 Monopoly - A market where there is a single producer of a product that has no close substitutes Conditions 1. A single seller 2. No substitutes 3. No entry 4. Almost complete control of market price Are there monopolies in the U.S.?
13. Types of Monopolies Natural monopoly Market situation where costs are minimized by having a single firm produce the product Geographic monopoly Occurs when a town is too small to support two or more of the same business Technological Monopoly A firm or individual has discovered a new manufacturing technique or has invented something new = monopoly (Gov’t gives patent or copyright) Government Monopoly A business the gov’t owns and operates that involve products that private industry cannot supply
14. REVIEW MOST COMPETITIVE LEAST COMPETITIVE BIGGEST # OF FIRMS MANY FIRMS A FEW FIRMS ONE FIRM NO CONTROL OVER PRICE SOME CONTROL OVER PRICE A LOT OF CONTROL OVER PRICE TOTAL CONTROL OVER PRICE
