Upload
karen-montgomery
View
216
Download
0
Tags:
Embed Size (px)
Citation preview
Market Structures
Least (Level of competition) Most
Virtually identical products
Many big names but product variety
75%+ market share
Full barriers &
price control
No price control (S&D)
Little price control, competitive
Similar goods
Econ of Scale?
Natural?
1000’s of producers
~10-~100 producers
2-5 producers
1 producer
Perfect
Competition
Monopolistic Competition
OligopolyMonopoly
Apply the structures to your worldWhat are some examples of
industries that fall into each of these categories?
List examples for each—be ready to defend or prove your choice.
Key Components of Perfect Competition
Almost all PC industries are with commodities—virtually identical products
Generally lowest start up costs and barriers of any business
Market forces determine prices—producers helpless to control the prices!– Therefore, gov’t protections are sometimes
needed for national security & self sufficiency Should gov’t set prices in PC for farmers?
Key Components of Monopolistic Competition
Products are different (Subway v. McD’s) & substitutes are available—marketing strategies important
Non-price competition—ex: extra service, bonus, 20% free!, different products…
When firms raise prices consumers find substitutes? Highly competitive!!
Merger Mania?
Oligopoly Characteristics
What results if Coke & Pepsi merged? Government’s role is to keep the
competitiveness of the oligopoly and block the merger.
Collusion & Price Fixing are illegal but it is hard to prove. – Collusion & price fixing are usually short
lived (cartels simulation) Should Gov’t split the companies to change
Oligopolies to MC?
Merger? Collusion?
Oligopoly Collusion or Competition?
USA Hooked on OPEC
Monopoly Characteristics Unrestricted monopoly is bad for
consumers & competition! Allowed when best for consumers— Natural Monopoly
When is a monopoly good? Economies of scale—p. 157 read
– This determines the market structure of an industry! Diminishing Returns—apply?
Patents—Used as incentives to innovate! Franchise licenses—contracted or
purchased monopolies
Roosevelt puts Trusts on a Diet!Is Microsoft a Monopoly? Why sued?
Bill Gates’ bed time stories
Questions Why do some industries fall naturally
into less competitive categories? – Ex: Airlines, Autos, Cable, Power?
• (Economies of Scale)
Should the government step in to make industries like Airlines more competitive? If so, would it work?
Should Education be privatized or is it better off as a Natural Monopoly?
Minimum Wage & Unemployment