Write down the names of three companies: competition. major competitors.

Transcription

1 Write down the names of three companies: 1. Company with very little competition. 2. Company with two to three major competitors. 3. Company with many competitors. Which situation do you think describes most markets in the United States?

2 Perfect also known as pure competition, large number of firms producing essentially the same product. No participants are large enough to have the market power to set the price of a homogeneous product. Buyers and sellers are so numerous that no one buyer/seller has any influence over the market price; price takers, price is determined by market supply and demand eg. 100 firms, each firm has 1% of the market Four Conditions: 1. Many buyers and sellers 2. Goods offered for sale are exactly the same/identical 3. Buyers and sellers have perfect access to information 4. Sellers are able to enter and exit the market freely

3 Condition Description Example(s) 1. Many Buyers and Sellers 2. Identical Products 3. Informed Buyers and Sellers 4. Free Market Entry and Exit

4 Commodities: Wheat Oranges Tomatoes Corn Crude Oil Stock Market

5 Monopoly - when one company controls the market of a good/service and can effectively dictate prices Microsoft, NFL, China s Pandas, Comcast, etc. Complete barrier to entry Government Monopolies a monopoly created by the government Patent gives a company exclusive rights to sell a new good or service for a specific period of time Franchise the right to sell a good or service within an exclusive market License a government issued right to operate a business

6 Price discrimination division of customers into groups based on how much they will pay for a product Market Power ability to control prices and total market output

7 Condition Description Example(s) 1. Discounted Airline Fares 2. Manufacturers Rebate Offers 3. Senior Citizen or Student Discounts 4. Children Fly or Stay Free Promotions

8 Monopolistic many companies selling similar products but not identical. Market for Jeans in the U.S. Four Conditions of Monopolistic 1. Many firms 2. Few artificial barriers to entry 3. Slight control over price 4. Differentiated products (main difference between perfect and monopolistic competition)

9 Condition Description Example(s) 1. Physical Characteristics 2. Location 3. Service Level 4. Advertising, Image or Status

10 Oligopoly a market structure in which a few large firms dominate a market; four largest firms produce at least 70-80% of the output. Automobile industry, commercial airlines, beer industry, cartels Characteristics High Barriers to Entry Collusion businesses work together to price fix, agreement to set prices Price Fixing agreement among firms to sell at the same or very similar prices Cartel a formal organization of producers that fix prices and control supply (OPEC)

11 1. Describe the four examples of price discrimination listed in the book (targeted discounts, pg. 163) 2. Define Nonprice competition (167). 3. Describe the four examples of nonprice competition (pg ) 4. Describe the four conditions of monopolistic competition (pg. 167) 5. Define cartel (171). 6. Define antitrust laws and trust (173).

12 Statement Concept (s) Explanation 1. Jane can purchase a share of Microsoft stock from Smith Barney or Schwab. There is no difference in the price of the product. 2. GM, Ford and Chrysler comprise 80% of the market share for automobiles. 3. It is nearly impossible to compete with the NFL. 4. In the market for cell phones, there are a number of different companies to select from. 5. OPEC controls the world s supply of oil. 6. Cilantros offers free meals to children under Publix uses the slogan, where shopping is a pleasure, to differentiate their products. 8. Microsoft used its market power

13 Statement Concept (s) Explanation 1. Jane can purchase a share of Microsoft stock from Smith Barney or Schwab. There is no difference in the price of the product. 2. GM, Ford and Chrysler comprise 80% of the market share for automobiles. 3. It is nearly impossible to compete with the NFL. 4. In the market for cell phones, there are a number of different companies to select from. 5. OPEC controls the world s supply of oil. 6. Cilantros offers free meals to children under Publix uses the slogan, where shopping is a pleasure, to differentiate their products. 8. Microsoft used its market Perfect In a perfectly competitive market, there is no difference in product

14 Statement Concept (s) Explanation 1. Jane can purchase a share of Microsoft stock from Smith Barney or Schwab. There is no difference in the price of the product. 2. GM, Ford and Chrysler comprise 80% of the market share for automobiles. 3. It is nearly impossible to compete with the NFL. 4. In the market for cell phones, there are a number of different companies to select from. 5. OPEC controls the world s supply of oil. 6. Cilantros offers free meals to children under Publix uses the slogan, where shopping is a pleasure, to differentiate their products. 8. Microsoft used its market Perfect Oligopoly In a perfectly competitive market, there is no difference in product Oligopolies exist when a few companies have market power

15 Statement Concept (s) Explanation 1. Jane can purchase a share of Microsoft stock from Smith Barney or Schwab. There is no difference in the price of the product. 2. GM, Ford and Chrysler comprise 80% of the market share for automobiles. 3. It is nearly impossible to compete with the NFL. 4. In the market for cell phones, there are a number of different companies to select from. 5. OPEC controls the world s supply of oil. 6. Cilantros offers free meals to children under Publix uses the slogan, where shopping is a pleasure, to differentiate their products. Perfect In a perfectly competitive market, there is no difference in product Oligopoly Oligopolies exist when 2-3 companies have market power Monopoly A monopoly exists when one company has market power

16 Statement Concept (s) Explanation 1. Jane can purchase a share of Microsoft stock from Smith Barney or Schwab. There is no difference in the price of the product. 2. GM, Ford and Chrysler comprise 80% of the market share for automobiles. 3. It is nearly impossible to compete with the NFL. 4. In the market for cell phones, there are a number of different companies to select from. 5. OPEC controls the world s supply of oil. 6. Cilantros offers free meals to children under Publix uses the slogan, where shopping is a pleasure, to Perfect In a perfectly competitive market, there is no difference in product Oligopoly Oligopolies exist when 2-3 companies have market power Monopoly Monopolistic A monopoly exists when one company has market power In a monopolistically competitive market, there are a range of similar, but different products

17 Statement Concept (s) Explanation 1. Jane can purchase a share of Microsoft stock from Smith Barney or Schwab. There is no difference in the price of the product. 2. GM, Ford and Chrysler comprise 80% of the market share for 3. It is nearly impossible to compete with the NFL. 4. In the market for cell phones, there are a number of different companies to select from. 5. OPEC controls the world s supply of oil. 6. Cilantros offers free meals to children under Publix uses the slogan, where shopping is a pleasure, to differentiate their products. 8. Microsoft used its market power to illegally force companies to not Perfect In a perfectly competitive market, there is no difference in product Oligopoly Oligopolies exist when 2-3 companies have market power Monopoly Monopolistic Cartel, Collusion, Pricefixing A monopoly exists when one company has market power In a monopolistically competitive market, there are a range of similar, but different products Cartels form when several businesses collude to control prices

18 Statement Concept (s) Explanation 1. Jane can purchase a share of Microsoft stock from Smith Barney or Schwab. There is no difference in the price of the product. 2. GM, Ford and Chrysler comprise 80% of the market share for 3. It is nearly impossible to compete with the NFL. 4. In the market for cell phones, there are a number of different companies to select from. 5. OPEC controls the world s supply of oil. 6. Cilantros offers free meals to children under Publix uses the slogan, where shopping is a pleasure, to differentiate their products. Perfect In a perfectly competitive market, there is no difference in product Oligopoly Oligopolies exist when 2-3 companies have market power Monopoly Monopolistic Cartel, Collusion, Pricefixing Price Discrimination A monopoly exists when one company has market power In a monopolistically competitive market, there are a range of similar, but different products Cartels form when several businesses collude to control prices When companies adjust prices based on the consumer to give the incentive to consume

19 Statement Concept (s) Explanation 1. Jane can purchase a share of Microsoft stock from Smith Barney or Schwab. There is no difference in the price of the product. 2. GM, Ford and Chrysler comprise 80% of the market share for 3. It is nearly impossible to compete with the NFL. 4. In the market for cell phones, there are a number of different companies to select from. 5. OPEC controls the world s supply of oil. 6. Cilantros offers free meals to children under Publix uses the slogan, where shopping is a pleasure, to differentiate their products. Perfect In a perfectly competitive market, there is no difference in product Oligopoly Oligopolies exist when 2-3 companies have market power Monopoly Monopolistic Cartel, Collusion, Pricefixing Price Discrimination Non-Price A monopoly exists when one company has market power In a monopolistically competitive market, there are a range of similar, but different products Cartels form when several businesses collude to control prices When companies adjust prices based on the consumer to give the incentive to consume Publix uses service levels to differentiate their product

20 Statement Concept (s) Explanation 1. Jane can purchase a share of Microsoft stock from Smith Barney or Schwab. There is no difference in the price of the product. 2. GM, Ford and Chrysler comprise 80% of the market share for 3. It is nearly impossible to compete with the NFL. 4. In the market for cell phones, there are a number of different companies to select from. 5. OPEC controls the world s supply of oil. 6. Cilantros offers free meals to children under Publix uses the slogan, where shopping is a pleasure, to differentiate their products. Perfect In a perfectly competitive market, there is no difference in product Oligopoly Oligopolies exist when 2-3 companies have market power Monopoly Monopolistic Cartel, Collusion, Pricefixing Price Discrimination Non-Price A monopoly exists when one company has market power In a monopolistically competitive market, there are a range of similar, but different products Cartels form when several businesses collude to control prices When companies adjust prices based on the consumer to give the incentive to consume Publix uses service levels to differentiate their product

21 Perfect Monopolistic Oligopoly Monopoly Number of Firms Variety of Goods Control Over Prices Barriers to Entry Examples

22 Perfect Monopolistic Oligopoly Monopoly Number of Firms Many Many A few dominate One Variety of Goods Control Over Prices Barriers to Entry Examples

23 Perfect Monopolistic Oligopoly Monopoly Number of Firms Many Many A few dominate One Variety of Goods None Some Some None Control Over Prices Barriers to Entry Examples

24 Perfect Monopolistic Oligopoly Monopoly Number of Firms Many Many A few dominate One Variety of Goods Control Over Prices None Some Some None None Little Some Complete Barriers to Entry Examples

25 Perfect Monopolistic Oligopoly Monopoly Number of Firms Many Many A few dominate One Variety of Goods Control Over Prices Barriers to Entry None Some Some None None Little Some Complete None Low High Complete Examples

26 Perfect Monopolistic Oligopoly Monopoly Number of Firms Many Many A few dominate One Variety of Goods Control Over Prices Barriers to Entry None Some Some None None Little Some Complete None Low High Complete Examples Agriculture, Stocks Jeans, Fast Food, Cell Phone Companies Automobile Industry, Beer Industry Microsoft, NFL