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Market Structures

Market Structures. Pure Monopoly Perfect Competition Monopolistic Competition Oligopoly. Characteristics of a Pure Monopoly. A single seller No Substitutes No Entry – market is protected by barriers of entry. Gov’t regulation, large investment, ownership of raw materials.

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Market Structures

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  1. Market Structures • Pure Monopoly • Perfect Competition • Monopolistic Competition • Oligopoly

  2. Characteristics of a Pure Monopoly • A single seller • No Substitutes • No Entry – market is protected by barriers of entry. Gov’t regulation, large investment, ownership of raw materials. • Almost Complete Control of Market Price - control supply of good or service.

  3. Types of Monopolies • Natural Monopolies • Help avoid overlapping • Government regulates price • Examples: Public Water, Utilities • Government Monopolies • Created by the government • Technology, patents, franchises, license • Geographic Monopolies • Walmart

  4. Conditions of Perfect Competition • Large Market – numerous sellers/buyers • Similar Product – identical good or service • Commodities = a product that is the same no matter who produces it. • Easy Entry and Exit – sellers can NOT prevent competition. Initial costs of investment are small, and goods/services are easily learned. • Start-up costs and the internet

  5. Conditions of Perfect Competition • Easily Obtainable Information – information about prices, quality, and sources of supply is easy for both buyers and sellers to obtain. • No Control Over Price – the workings of supply and demand control the market.

  6. Characteristics of Monopolistic Competition • Numerous Sellers – no one dominates • Relatively Easy Entry • Differentiated Products – slightly different products to attract customers.

  7. Characteristics of Monopolistic Competition • Nonprice Competition – advertising, physical characteristics, location, service level • Some Control Over Price Toothpaste, most neighborhood businesses

  8. Characteristics of an Oligopoly • Domination by a Few Sellers • Top sellers account for 80% • Barriers to Entry • Sometimes created by gov’t • Identical or Slightly Different Products

  9. Characteristics of an Oligopoly • Nonprice Competition – minor differences in product • Limited Control Over Price – price wars, price fixing, collusion Example of Oligopoly – The Airline industry

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