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Market Structures


Geraldine Sagasta

on 13 April 2018

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Transcript of Market Structures

Set up your notebooks for this week
Week 12 Starters Pg. 60
Week 12 Cover Page Pg. 61

1. What is a market?
2. Give an example for your definition.

Notes: Market Structures
Week 14 Starters: Page 76
Week 14 Cover Sheet: Page 77
Prepare your notebooks for this week:
pg. 64

so they can charge
a higher price

try to convince the buyer that a product is better than the rest -

Firms will produce a quantity of output where price is greater than the cost up to a point

c. Profit Maximization -


Total Revenue - Total Costs =

Maximize profits

c. Profit Maximizing -

90% of all computers sold in the world have some type of Windows system in them

some say Microsoft


e. B/S are free to enter into, conduct, or get out of business

d. B/S must be reasonably well-informed about items for sale

buyers compete against each other for the best prices

As long as this happens, sellers compete for consumers dollars

c. B/S act independently -

- airlines

- gasoline

Harder for others to raise prices

1 oligopoly company lowers price and others follow

Price wars -

b. Price Behavior -

Characteristics -

One airline lowers fares, many will follow



When 1 company does something, the rest follow

a. Independent behavior -

5. Ease at which firms can enter and leave the market

4. Nature of the product

3. Possibility of collusion among buyers and sellers

2. Availability and accessibility of accurate information

1. The number of buyers and sellers in the marketplace

b. degree of competition is largely determined by:

a. Refers to the extent to which competition prevails in particular markets

Definition -

soft drinks

breakfast cereals

household appliances




- a product which the buyers are not indifferent to the seller from whom they purchase it when the price charged by all sellers is the same

- a product that differs physically or in some other way from similar products produced by other firms

2. Differentiated Product -

TV / same price - whether you buy it at:


- each product is a perfect substitution for the other

- a product such that the buyers are indifferent to the seller from whom they purchase it so long as the price charged by all sellers is the same

1. Standardized Product -

2 Terms you have to know!!

Product is similar from company to company but NOT identical

difference between pure competition and monopolistic competition

a. Product differentiation -


easy entry

Large number of sellers producing differentiated product

3. Monopolistic Competition -

Owners keep salaries down

Major League Baseball


secret agreements

usually higher

price fixing - all charge the same price


A formal agreement to set prices or to otherwise behave in a cooperative behavior

2. Collusion -

4. Pure Competition

3. Monopolistic Competition

2. Oligopoly

1. Monopoly

same thing

drug -


Group of nations who purposely keep prices high because of the rest of the world dependence on it

oil -


A group of producers or sellers who agree to limit the production or sale of a product to control prices

1. Cartel -

Cartel / Collusion -
McDonalds, Burger King dominate the fast food industry

Coke, Pepsi - dominate the soft drink industry


however, each firm is affected by rivals (competition)

This means that pricing and output are independent of each other
entry is difficult / hard for new players

market where there are few sellers

2. Oligopoly

cable T.V

Usually one company in the area

Local phone companies


government sponsored monopoly

United States Postal service


entry into the market is blocked so that the firm IS the industry

market which one firm is the sole seller of a product or service

1. Monopoly

ex: salt - different brands, same salt

no need to advertise

brand name


no differentiation exists between -

b. B/S deal in identical products -

a. large number of B/S exist. No single B/S is large enough or powerful enough to affect price

Characteristics -

easy entry

large number of firms producing standardized products

4. Pure Competition -

spend wisely - don’t spend money against competition / is none

Ex: diamonds

Luxury - YES!

Ex: utilities - everyone needs them

Necessity - NO!

e. advertising

d. Blocked entry - no competition, no obstacles

c. Price makers - set the price, no competition, P

b. No substitutes - no alternatives

a. Single seller - one firm industry

Characteristics -

e-mail / internet




C. Introduces consumers to products that compete with existing monopolies

new technology

B. can not find a substitute for most items

higher prices

A. people don’t like them -

monopolies are rare and few in number

Levi’s, Arizona, Gap, Guess?

Jeans -

Ford, Chevy

Cars -

When advertising or promotions try to convince buyers….
their product is the best
b. Non Price Competition -

colors, ankle support, shock absorbers, lights


BBQ, Plain, Ridges, Sour cream

Potato chips



water districts

post offices

National, state, local levels


government operations

d. Government monopoly -

Art / literature works published-
for their lifetimes plus 50 years

b. copywrite -

Exclusive rights to manufacture, use, or sell a product

a. patent -

Invention of new products, new manufacturing technologies that have been invented

c. Technological Monopoly -
If it does well competitors will follow

drawback -

gas stations

Out in far areas

b. Geographical Monopoly -



bus companies


nature of the business dictates society is best served by a monopoly
a. Natural monopoly -

Types of Monopolies
Market Structures
1. Define Monopoly
2. Give an example of a monopoly.
3. Why do people not like monopolies?
1. Define Oligopoly
2. What is the difference between Oligopoly and Monopoly?
Open your notebooks to pages 69-74 for your notes.
1. What type of market structure are each of these companies in?
2. How can you tell?
AT&T Uverse
Del Taco
an Elote man
Full transcript