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
