Economics -- Perfect Competition, Monopoly, Oligopoly

Monopoly

1. Sole supplier of a product with no close substitutes or competition -- 2. Comes from the Greek word meaning one seller. 3. High Barriers to Entry with this one. 4. They are not always profitable

Collusion

Agreement amongst firms in a market to divide the market and fix prices.

No control over pricing -- No differences among products -- Low Barrier of entry -- Standardized Products -- Firms are small compared to size of entire market

Characteristics of Perfect Competition

Examples of Control of Essential resources

China and their pandas -- Cities and their sports stadiums. Alcoa and Bauxite (makes aluminum)

Price Fixing

Crime Cartel member would be charged with if they were to set foot in the United States.

Cartel

Group of firms that agree to act as a single monopolist -- illegal in the U.S.A.

Barriers to entry in markets controlled by a Monopoly

Legal Restrictions -- Economies of Scale -- Control of Essential Resources --

Patents, Licenses, and Trademarks

Legal ways a government can prevent firms from entering a market controlled by a monopoly

Four ways sellers differentiate their product

Location -- Product image (celebrity endorsements) -- Physical appearance (most obvious) -- Variety of services offered

Monopolistic Competition

Many firms offering products that have only slight differences from supplier to supplier. Convenience Stores, Radio Stations, Book Stores, etc...

Oligopoly

Market dominated by just a few firms -- comes from the Greek word meaning few sellers

Interdependent or Interdependency

Means that what one firms does will create other firms to do the same thing. This usually involves changes in price, changes in output and changes in advertising

Price

Only thing buyer is concerned with in a perfectly competitive market

Commodity

Oranges, Bushel of wheat, corn, soybeans, some cattle, natural gas, Precious metals, etc..

Perfect Competition

Really no competition -- Individuals in a Perfect Competition Market are not rivals. Because what they sell and how much they sell has no influence on the market price

Undifferentiated Oligopoly

Sells products that are identical across producers -- They are the same, no differences

Differentiated Oligopoly

Sells products that differ across producers. For instance, Ford vs. Honda etc...

Excess Capacity

Term used in Monopolistic competition. Means there are more units/items available than there are people using them. For instance: Hotels and Funeral Homes

Economies of Scale

Terms used when monopolies "emerge naturally" such as stores in small towns, utility companies, bus service, etc..

Market Power

The ability of a firm to raise prices without losing sales to its rivals

Market Structure

The important features of a market

Price, Quantity and Availability

What buyers are fully informed about in a perfectly competitive market