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Chapter 7 Section 3

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Chapter 7 Section 3 Markets can be grouped into 4 different basic structures : 1)Perfect competition 2) Monopolistic Competition 3) Oligopoly 4)Monopoly *The two ... – PowerPoint PPT presentation

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Title: Chapter 7 Section 3


1
Chapter 7 Section 3
2
  • Markets can be grouped into 4 different basic
    structures
  • 1)Perfect competition
  • 2) Monopolistic Competition
  • 3) Oligopoly
  • 4)Monopoly

3
  • The two extremes in the range of market
    structures are Perfect Competition Monopolies.
  • The middle ground is provided by monopolistic
    competition and oligopolies.
  • Monopolistic Competition a market structure in
    which many companies sell products that are
    similar but not identical .

4
  • The difference between Perfect Competition and
    Monopolistic Competition arise because
    Monopolistic Competitive firms sell goods that
    are similar enough to be substituted for one
    another but not identical .

5
  • Monopolistic Competition develops under four
    conditions
  • Many Firms
  • Few Artificial Barriers to Entry
  • Slight Control Over Price
  • Differentiated Products

6
-Oligopoly-Describes a market dominated by a few
large profitable firms. 2 to 4 firms that
produce 70 or more of sales in a market
7
-An oligopoly can form when significant barriers
to entry keep new companies from entering the
market to compete with existing firms. -Sometime
these barriers are created by a system of
government licenses or patents. -High start-up
costs, such as expensive machinery or a large
advertising campaign, can scare firms away from
the market.
8
-Some oligopolies occur because of economies of
scale. When a firm experiences economies of
scale, the average cost of production decreases
as output increases. -In a market with a
monopoly, only one company can produce enough
goods to earn a significant profit. With
oligopolies, perhaps 3 or 4 companies can reach a
profitable level of output before the market gets
crowded.
9
  • -Firms try not to compete on price alone . The
    alternative is Nonprice Competition , or
    competition through ways other than lower prices.
  • Nonprice Competition takes several different
    forms
  • Physical Characteristics
  • Location
  • Service Level
  • Advertising , Image or Status .

10
  • What are the 4 conditions of Monopolistic
    Competition?

11
  • How do economist determine whether a market is an
    oligopoly ?

12
  • Give 3 examples of Nonprice competition .

13
  • How would price fixing and collusion help
    producers ?

14
  • Understand how firms compete without market set
    input .

15
  • Explain how firms compete without lowering prices
    .

16
  • Define oligopoly 3 ways for firms in an
    oligopoly to control a market .

17
  • Would you describe the following markets as
    monopolistic competition or oligopoly ?
  • Refrigerators
  • Video games
  • Gourmet Ice Cream
  • Sunscreen
  • Cable Sports Channels

18
  • Why do firms in monopolistic competition have
    some control over prices ?
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