Market Structures - PowerPoint PPT Presentation

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Market Structures

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Market Structures Perfect Competition Ideal, but theoretical Large number of buyers and sellers Well-informed Independent Identical products Freedom to get into and ... – PowerPoint PPT presentation

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Title: Market Structures


1
Market Structures
  • Perfect CompetitionIdeal, but theoretical
  • Large number of buyers and sellers
  • Well-informed
  • Independent
  • Identical products
  • Freedom to get into and out of business
  • Perfect competition is really a baseline used to
    judge other market structures

2
Market Structures (cont.)
  • Monopolistic CompetitionSimilar to perfect
    competition except that the products are not
    identical
  • Product differentiationreal or imagined is used
    more than price to get customers
  • Oligopolya few large sellers dominate the
    industry
  • These companies tend to copy each other so that
    no one will have the advantage
  • Example stuffed crust pizza, combination meal,
    ice beer
  • Collusion and price-fixing

3
Market Structures (cont.)
  • MonopolyA market with only one seller
  • Generally illegal unless authorized by the
    government
  • Types of Monopoly
  • NaturalUtilities tend to be the most common form
  • Geographicwhen an area is too small to support
    more than one firm that sells a particular
    product
  • TechnologicalWhen a firm has control of a
    particular idea, scientific advancement, or
    manufacturing process (example Kevlar, Viagra,
    Tickle-Me Elmo)
  • GovernmentWhen private industry is unable to
    reliably provide a particular service that is
    vital (example Amtrak, Military)
  • Baseball

4
Market Failures
  • When the five conditions to meet perfect
    competition are not met
  • Tends to lead to inefficient use of resources,
    corruption, political influence
  • Externalitiesan unintended side effect from a
    business or activity
  • Positive
  • Negative

5
The Role of the Government
  • Antitrust Lawslaws that attempt to prevent
    inadequate competition
  • Regulatory agenciesThese agencies are set up to
    protect consumers
  • Food and Drug Administration (FDA)
  • Disclosure, food labels
  • Federal Communications Commission (FCC)
  • Control of the airwaves are vital to national
    security
  • Securities and Exchange Commission (SEC)
  • Federal Aviation Administration (FAA)
  • Little margin for error
  • Occupational Safety and Health Administration
    (OSHA)
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