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Transcript of Market Structures
Perfect Competition is considered the ideal structure in a market economy. It is rare to find, and all other structures are based on how close they are to Perfect Competition.
Monopolistic Competition occurs when many sellers offer similar but differentiated products.
An Oligopoly is a market structure which has few sellers (producers) who offer similar products (goods and services).
Now that you have a greater understand of the various types of market structures read and review the primary sources about Microsoft. It is your job to decide what market structure Microsoft operates in using examples from the text provided.
A market structure is an economic model
that examines the degree of competition
occurring among businesses in an industry.
Four Market Structures
The market structures are listed below from the
greatest amount of competition to the least.
1. Perfect Competition
Let's take a look at each one up close
For a market to be considered perfectly competitive it must meet all of the following c
1. Many buyers and sellers: This is critical to perfect competition because it ensures no one buyer or seller can control the price.
2. Standardized Product: Sellers offer a product consumers consider to be identical in all essential features. In essence the products are so similar the fulfill the same wants.
3. Freedom to Enter and Exit the Market: There is no government regulations or other restrictions to enter the market as a producer, nor is there anything that stops a consumer from entering.
4. Independent Buyers and Sellers: Consumers, nor producers join together to try and influence the price of an item.
5. Well Informed Buyers and Sellers: Consumers can compare prices with other producers to ensure they are getting a fair price, while producers can look at other producers prices to ensure they are making a fair profit.
All of these conditions create a situation where producers are
, that is they except the market price determined by supply and demand.
While you watch this video about a Farmers Market please write at least one example of each
characteristic of Perfect Competition from the video.
Monopolistic Competition has four characteristics and shares two of them with Perfect Competition.
The two characteristics they share are:
1. Many Buyers and Sellers
2.Freedom to Enter and Exit the Market
The two characteristics unique to Monopolistic Competition are:
1.Similar but Differentiated Products: Producers try to make their good or service seem better than other making a similar product. This leads to a lot of advertising!
2. Limited Control of Price: Due to product differentiation producers can sell a good or
a service a prices within the range of consumers demand.
While you watch this video about the best fast food burger please write at least one example of each
characteristic of Monopolistic Competition from the video.
The characteristics of an Oligopoly are as follows:
1. Few Sellers (Producers) many buyers(consumers). These few producers make the market share of the goods.
2. Standardized or Differentiated Product. In this market structure it producers can sell identical or near identical goods as long as they are considered substitutes.
3. More Price Control: With less producers they have the ability to manipulate the price of the item they are producing. Pricing depends on how the other firms behave when prices change.
4. Little Freedom to Enter or Exit the Market: The cost of competing with the few firms producing in an oligopoly would be difficult because they have a market share and own most of the factors of production. Similarly it would be difficult for those producers in this market to shift their factors of production to another good or service.
Think about the four characteristics listed above. Write a 5-7 sentence explanatory paragraph proving that movie theaters are an oligopoly. Include three characteristics in your paragraph.
A Monopoly occurs when there is one seller and that product
has no close substitutes.
Characteristics of a Monopoly:
1. One Seller(Producer): Only one producer sells that good or service.
2. A Restricted/Regulated Market: Either the government or the producer itself makes it impossible for other firms to enter the market. This can be done by laws or by owning all of the factors of production.
3. Control of Price: Because there are no close substitutes producers can manipulate the supply of the good or service, thereby manipulating the price.
While you watch this video about the OPEC please write at least one example of each characteristic of a Monopoly from the video.