Chapter 7 Section 3

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Chapter 7 Section 3
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• Markets can be grouped into 4 different basic
  structures
• 1)Perfect competition
• 2) Monopolistic Competition
• 3) Oligopoly
• 4)Monopoly

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• The two extremes in the range of market
  structures are Perfect Competition Monopolies.
• The middle ground is provided by monopolistic
  competition and oligopolies.
• Monopolistic Competition a market structure in
  which many companies sell products that are
  similar but not identical .

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• The difference between Perfect Competition and
  Monopolistic Competition arise because
  Monopolistic Competitive firms sell goods that
  are similar enough to be substituted for one
  another but not identical .

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• Monopolistic Competition develops under four
  conditions
• Many Firms
• Few Artificial Barriers to Entry
• Slight Control Over Price
• Differentiated Products

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-Oligopoly-Describes a market dominated by a few
large profitable firms. 2 to 4 firms that
produce 70 or more of sales in a market
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-An oligopoly can form when significant barriers
to entry keep new companies from entering the
market to compete with existing firms. -Sometime
these barriers are created by a system of
government licenses or patents. -High start-up
costs, such as expensive machinery or a large
advertising campaign, can scare firms away from
the market.
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-Some oligopolies occur because of economies of
scale. When a firm experiences economies of
scale, the average cost of production decreases
as output increases. -In a market with a
monopoly, only one company can produce enough
goods to earn a significant profit. With
oligopolies, perhaps 3 or 4 companies can reach a
profitable level of output before the market gets
crowded.
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• -Firms try not to compete on price alone . The
  alternative is Nonprice Competition , or
  competition through ways other than lower prices.
• Nonprice Competition takes several different
  forms
• Physical Characteristics
• Location
• Service Level
• Advertising , Image or Status .

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• What are the 4 conditions of Monopolistic
  Competition?

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• How do economist determine whether a market is an
  oligopoly ?

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• Give 3 examples of Nonprice competition .

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• How would price fixing and collusion help
  producers ?

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• Understand how firms compete without market set
  input .

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• Explain how firms compete without lowering prices
  .

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• Define oligopoly 3 ways for firms in an
  oligopoly to control a market .

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• Would you describe the following markets as
  monopolistic competition or oligopoly ?
• Refrigerators
• Video games
• Gourmet Ice Cream
• Sunscreen
• Cable Sports Channels

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• Why do firms in monopolistic competition have
  some control over prices ?