Standard

SSEMI4c- Identify the basic
characteristics of the four market
structures
Competition and Market Structures
Adam Smith – Laissez faire
 The philosophy that the government
should not interfere with commerce or
trade

Market structure
the nature or degree of competition
among firms operating in the same
industry
 4 different types

Perfect
Competition
Oligopoly
Monopolistic
Competition
Monopoly
Perfect Competition
A large number of well informed
independent buyers and sellers who
exchange identical products
 5 major characteristics

Necessary Conditions
Buyers and
sellers deal in
identical
products
No single buyer
or seller large
enough to affect
the price
Buyer and seller
acts
independently
Perfect
Competition
Buyers and
sellers are
reasonably
informed
Buyers and
sellers are free
to enter,
conduct, or get
out of business
Price setting

In a perfect competition supply and
demand set the equilibrium price.
What’s the problem?
Most markets don’t meet all the
conditions of perfect competition
 This is an Imperfect Competition.

Monopolistic Competition
A market structure that has all the
conditions of perfect competition except
for identical products
 Product differentiation- real or imagined
differences between competing products

Non Price Competition

The use of advertising, giveaways, or
promotional campaigns to convince
buyers that the product is somehow
better than another brand
Oligopoly
A market structure in which very large
sellers dominate the industry.
 Because oligopolists are so large, one firm
follows the other.

Collusion

A formal agreement to set prices or to
otherwise behave in a competitive
manner
Cartel
Companies openly organized that use
price fixing and market sharing
 IE: OPEC

Monopoly
A market structure with only one seller
of a particular product
 One reason America has very few is
because we outlaw them.

Types of monopolies
Trust- Another name for a regular
monopoly
 Natural Monopoly-One large firm runs
efficiently and provides all output
 Government Monopoly-Created by the
government through copyright, patent, or
allowing just one producer

Monopoly tactics
Vertical Integration:
Own all parts of the
production process
 Andrew CarnegieSteel

Monopoly tactics

Horizontal
integration-two or
more companies that
do the same thing
come together

J.D RockefellerStandard Oil