Market Structure
1. Characteristics of the four market structures. [monopoly, oligopoly, monopolistic competition, & perfect competition]
2. Know the four types of monopolies. [Government, Natural, Technology, and Geographic]
Market Structure Vocabulary
I. Perfect Competition – has a very large number of sellers (hundreds or thousands) of the same product (any agriculture or fishery product). They are all selling the same undifferentiated products (oranges).
20 Monopolistic Competition – fairly large number (25-75) of sellers competing to sell slightly differentiated products. Product differentiation (real or imaginary) is vital.
This is the most common market structure.
Monopolistic Competition
This is the most common market structure – over 99% of all firms. Monopolistic Competition and Price
There is some control over price because differentiation creates buyer loyalty [jeans].
Non-price competition is used to control price. Developing brand name loyalty will enable a firm to marginally increase price without losing customers. If the increase is too much, buyers will switch to a competitor’s product.
24 Oligopoly – “the chosen few” (3 or 4) firms control 70% of the market. Four Market Conditions For Oligopolies
1. A few sellers control over 70% of market.
2. Firms offer identical or differentiated products.
3. Product information must be easily available. They use informative advertisement (price, quality, and special features) to introduce new products.
4. There are huge barriers to entry into the industry. The three major barriers are technological knowledge, money, & brand name loyalty.
Entry is difficult because many have patents or own essential raw materials. This makes it difficult for new firms to try to compete.
Pure
2. Know the four types of monopolies. [Government, Natural, Technology, and Geographic]
Market Structure Vocabulary
I. Perfect Competition – has a very large number of sellers (hundreds or thousands) of the same product (any agriculture or fishery product). They are all selling the same undifferentiated products (oranges).
20 Monopolistic Competition – fairly large number (25-75) of sellers competing to sell slightly differentiated products. Product differentiation (real or imaginary) is vital.
This is the most common market structure.
Monopolistic Competition
This is the most common market structure – over 99% of all firms. Monopolistic Competition and Price
There is some control over price because differentiation creates buyer loyalty [jeans].
Non-price competition is used to control price. Developing brand name loyalty will enable a firm to marginally increase price without losing customers. If the increase is too much, buyers will switch to a competitor’s product.
24 Oligopoly – “the chosen few” (3 or 4) firms control 70% of the market. Four Market Conditions For Oligopolies
1. A few sellers control over 70% of market.
2. Firms offer identical or differentiated products.
3. Product information must be easily available. They use informative advertisement (price, quality, and special features) to introduce new products.
4. There are huge barriers to entry into the industry. The three major barriers are technological knowledge, money, & brand name loyalty.
Entry is difficult because many have patents or own essential raw materials. This makes it difficult for new firms to try to compete.
Pure