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Ch. 7: A Spectrum of Markets

Ch. 7: A Spectrum of Markets. GR. 11 ECONOMICS (CIE3M1) M. Nicholson. Perfect Competition. Many sellers of identical product Easy to enter the industry No control over price and no advertising Examples – stock market, agriculture. Monopoly. One seller and no substitutes

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Ch. 7: A Spectrum of Markets

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  1. Ch. 7: A Spectrum of Markets GR. 11 ECONOMICS (CIE3M1) M. Nicholson

  2. Perfect Competition • Many sellers of identical product • Easy to enter the industry • No control over price and no advertising • Examples – stock market, agriculture

  3. Monopoly • One seller and no substitutes • Very difficult or impossible to enter the industry • Price-maker  much control over price • Advertise to improve image • Examples  water, urban transit, cable

  4. Oligopoly • Homogeneous: some product distinction • Differentiated: much product distinction • Few sellers and difficult to enter • Some control over price • Much advertising for differentiated • Automobiles, beer differentiated • Steel, cement homogeneous

  5. Monopolistic Competition • Many sellers with some product distinction • Easy to enter the industry, but a little control over price • Lots of advertising • Examples  Fast food, clothing

  6. Concentration In Canadian Industry • Concentration ratio measures the proportion of industry’s sales by top 4 and top 8 • Tobacco, oil and transportation equipment have little competition

  7. Restricting Competition • Unfair competition • Establishing a cartel • Interlocking directorates • Mergers • Horizontal, vertical, conglomerate mergers • Establishing a holding company

  8. Advantages Of Large-Scale Operations • Money available for research to develop new and better products and more efficient, cheaper production methods • Large quantity production allows for specialized machinery (capital) and labour (human) that increases efficiency and lowers cost (e.g. automobiles)

  9. Government Regulation • Government Ownership – natural monopolies • Laws to promote competition • Regulation of prices and services

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