Market Structures

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Market StructuresMarket StructuresSECTION 1: Highly Competitive MarketsSECTION 2: Imperfectly Competitive MarketsSECTION 3: Market Regulation

CHAPTER 6

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Objectives:Objectives:What is perfect (pure) competition?What is monopolistic competition?How do sellers differentiate their products

under monopolistic competition?

Highly Competitive MarketsHighly Competitive MarketsSECTION 1

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Perfect (pure) competitionPerfect (pure) competition is a is a market structure in which buyers and market structure in which buyers and sellers each compete directly and sellers each compete directly and completely under the laws of supply completely under the laws of supply and demand.and demand.


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Monopolistic competitionMonopolistic competition is a is a market structure in which producers market structure in which producers sell different rather than identical sell different rather than identical products.products.


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Sellers differentiate their products Sellers differentiate their products under monopolistic competition under monopolistic competition through nonprice competition, such as through nonprice competition, such as advertising.advertising.


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Objectives:Objectives:How is an oligopoly structured?What is a monopoly?What types of monopolies exist?What factors affect prices in oligopolies and

monopolies?

Imperfectly Competitive MarketsImperfectly Competitive Markets

SECTION 2

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Structure of an oligopoly:Structure of an oligopoly:only a few large sellers, and they control

most of the production of a product sellers offer identical or similar productsnew sellers find market entry difficult


SECTION 2

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Characteristics of a monopoly:Characteristics of a monopoly:one sellerno close substitute goodsdifficult to enter market


SECTION 2

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Types of monopolies:Types of monopolies:natural monopolies—one large seller produces a

good or service most efficientlygeographic monopolies—isolated geographic

location attracts only one seller technological monopolies—one producer owns the

technology that created the marketgovernment monopolies—government is the sole

seller of a product


SECTION 2

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Factors that affect prices in Factors that affect prices in oligopolies and monopolies:oligopolies and monopolies:consumer demandpotential competitiongovernment regulation


SECTION 2

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Objectives:Objectives:What was the relationship between the U.S.

government and business before the 1880s?What was the purpose of early antitrust

legislation?How has the government enforced antitrust

legislation?

Market RegulationMarket RegulationSECTION 3

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Laissez-faire relationship between the Laissez-faire relationship between the federal government and businessfederal government and businessBefore the 1880s, the U.S. government did

not interfere with business or the marketplace.


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Purpose of early antitrust legislation:Purpose of early antitrust legislation: to monitor and regulate big business to prevent formation of monopolies to break up existing monopolies


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Government enforcement of antitrust legislation:Government enforcement of antitrust legislation: broke up Standard Oil Company of Ohio in 1911 and

AT&T in 1982 with the Sherman Antitrust Act created watchdog groups, such as the Interstate

Commerce Commission and the Federal Trade Commission

strengthened antitrust legislation with acts such as the Celler-Kefauver Act of 1950, the Antitrust Procedures and Penalties Act of 1975, and the Parens Patriae Act of 1976


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1.1. How does perfect competition differ from monopolistic competition? Give an example of each.

2.2. How are oligopolies different from monopolies?How are oligopolies different from monopolies?3.3. How does a cartel operate? Why are cartels illegal in How does a cartel operate? Why are cartels illegal in

the United States?the United States?4.4. How do oligopolies and monopolies affect product How do oligopolies and monopolies affect product

choice and price?choice and price?5.5. What factors encouraged the U.S. government to What factors encouraged the U.S. government to

abandon its laissez-faire economic policies in the abandon its laissez-faire economic policies in the 1880s?1880s?

Wrap-UpWrap-UpCHAPTER 6

Market Structures

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