Competition and Market Structures
LBHS Economics
Mr. Alvarez
Market Structures Overview
Market Structure: the nature and degree of
competition among firms operating in the same
industry.
Markets are classified according to certain
structural characteristics:
Pure Competition
Monopolistic Competition
Oligopoly
Monopoly
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Pure Competition
Pure Competition: this market situation includes
independent and well informed buyers and sellers of
exactly the same economic product.
Conditions for pure competition:
1)No buyer or seller large enough to effect price
2)Buyers & sellers deal in identical products
3)Each buyer & seller acts independently
4)Buyers & sellers are reasonably well-informed
5)Buyers & sellers are free to get in or out of business
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Pure Competition
If all 5 conditions are satisfied: no preferred brands
would exist b/c products would be identical, no
restrictions or barriers would exist!
Pure Competition is almost a theoretical situation
Market situations usually lack one or more of the
conditions of pure competition and are called
imperfect competition.
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Monopolistic Competition
Monopolistic Competition is the market
structure that has all of the conditions of
pure competition except for identical
products:
Product Differentiation
Nonprice Competition
Profit Maximization
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Monopolistic Competition
Product Differentiation & Nonprice Competition:
The product being sold is similar from one to another,
it is not identical. Suppliers advertise to demonstrate
how their products are better.
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Market Structures
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Monopolistic Competition
Profit Maximization
If the firm convinced consumers that its
product is better, it can charge a higher
price!
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Oligopoly
Oligopoly: A market situation in which a few
very large sellers of a product dominate.
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Monopoly
Monopoly: A market situation with only one
seller of a particular economic product that
has no close substitutes.
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Monopoly
When economists talk about monopolies
they are often talking about near
monopolies:
Natural Monopoly
Geographic Monopoly
Technological Monopoly
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Monopoly
Near Monopolies
Natural Monopoly: costs are minimized by
having a single firm produce the product.
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Monopoly
Near Monopolies
Geographic Monopoly: No other business
in the area offers competition.
Technological Monopoly: The special
privileges given to those who invent a
product or process (i.e. copyright or patent).
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Market Structure Review
Copy the companies below:
Ford
Levis
Coke
Sunkist Oranges
Carnegie Steel
Dell
Standard Oil
Dole Bananas
What market structure do they belong?
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Unit Two Exam – Block
Topics:
•Supply/Demand + Prices
•Market Structures (today)
•Personal Finance Topics (saving & investing)
Format: True/False, Multiple Choice & Short Essay
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