Post on 29-Nov-2014
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Short Quiz1. Why would it be bad if you were
a firm in a perfect competition market?
2. Why do consumers like perfect competition market?
3. Under what condition should a firm shut down rather than exit
the market?
Economic Competition
• 4 basic market types:– Perfect Competition– Monopolistic Competition– Oligopoly– Monopoly
• Measures price/nonprice competition, and product differentiation
You sell….
• Your boss gives you $100,000 to develop a plan gain some pricing power. What will you suggest the company spend money on?
You sell….• New type of pencil and
patent• New colors• New erasers• Advertise• Support gov’t regulation to
keep competition out• Sign exclusive deal with
Office Max, TUSD, College Board, etc
Monopolistic Competition Market• Features:• Many firms• Different or perceived different
products (brand names too)• Product “differentiation”• Some pricing power
“price makers”• Can be easy to start new firm• Can be easy to close down
firm• Not fully informed consumers
Other Examples?
Perfect
Competition
Monopolistic
CompetitionOligopoly Monopoly
On your white boards: What type of market?
• Blank DVD’s
What type of market?
• Mexican Food
What type of market?
What type of market?
• Hair cut
What type of market?
• Electric Power
What type of market?
• Notebook paper
What type of market?
• Oil in Mexico
What type of market?
• Hotels
Assignments1. Activity 28 (packet)2. Mankiw: pg 327
#5, 7, 83. Chapter 14: 2
questions re: reading & #2-4 pg 297
4. Activity #?5. Article #4
Mankiw Pages 346
•#3, 5, 7, 8