Market Structures
“the nature and degree of
competition among firms operating
in the same industry”
Competition and Market Structure
Barriers to Entry
PRICE will be the main
factor that leads
consumers to choose
one business over
another
Can you think of any
goods or services that
exhibit all
characteristics of
“perfect competition”?
With monopolistic
competition, in addition
to pricing, businesses
compete using:
•Product differentiation
•Favorable Location
•Level of service
•Advertising
•Giveaways/special
discounts
With an oligopoly, each
business must respond
quickly to actions of a
competitor.
Can lead to:
--collusion
(work cooperatively)
--price-fixing
(generally raise prices)
--price wars
(generally lowers prices)
--non-price competition
(advertising, product
differentiation, etc.)
Some legal monopolies:
--natural monopoly=costs are minimized
by having only one supplier
“economies of scale”=cost of
production decreases as business gets
larger. This can help consumers.
“franchises” =one licensed supplier,
subject to regulation
--geographic monopoly=remote location
--technological monopoly=based on
ownership of scientific advancement
==patent
==copyright
--government monopoly=gov’t controls
products and services that private
industry cannot (or would not)
adequately provide