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CHAPTER 6

Market Structures
SECTION 1: Highly Competitive Markets
SECTION 2: Imperfectly Competitive Markets
SECTION 3: Market Regulation

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SECTION 1
Highly Competitive Markets

Objectives:
 What is perfect (pure) competition?
 What is monopolistic competition?
 How do sellers differentiate their products
under monopolistic competition?

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SECTION 1
Highly Competitive Markets
Perfect (pure) competition is a
market structure in which buyers and
sellers each compete directly and
completely under the laws of supply
and demand.

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SECTION 1
Highly Competitive Markets
Monopolistic competition is a
market structure in which producers
sell different rather than identical
products.

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SECTION 1
Highly Competitive Markets
Sellers differentiate their products
under monopolistic competition
through nonprice competition, such as
advertising.

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SECTION 2
Imperfectly Competitive Markets

Objectives:
 How is an oligopoly structured?
 What is a monopoly?
 What types of monopolies exist?
 What factors affect prices in oligopolies and
monopolies?

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SECTION 2
Imperfectly Competitive Markets

Structure of an oligopoly:
 only a few large sellers, and they control
most of the production of a product
 sellers offer identical or similar products
 new sellers find market entry difficult

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SECTION 2
Imperfectly Competitive Markets

Characteristics of a monopoly:
 one seller
 no close substitute goods
 difficult to enter market

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SECTION 2
Imperfectly Competitive Markets

Types of monopolies:
 natural monopolies—one large seller
produces a good or service most efficiently
 geographic monopolies—isolated
geographic location attracts only one seller
 technological monopolies—one producer
owns the technology that created the market
 government monopolies—government is the
sole seller of a product
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SECTION 2
Imperfectly Competitive Markets

Factors that affect prices in


oligopolies and monopolies:
 consumer demand
 potential competition
 government regulation

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SECTION 3
Market Regulation

Objectives:
 What was the relationship between the U.S.
government and business before the 1880s?
 What was the purpose of early antitrust
legislation?
 How has the government enforced antitrust
legislation?

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SECTION 3
Market Regulation
Laissez-faire relationship between the
federal government and business
 Before the 1880s, the U.S. government did
not interfere with business or the
marketplace.

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SECTION 3
Market Regulation

Purpose of early antitrust legislation:


 to monitor and regulate big business
 to prevent formation of monopolies
 to break up existing monopolies

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SECTION 3
Market Regulation
Government enforcement of antitrust legislation:
 broke up Standard Oil Company of Ohio in 1911
and AT&T in 1982 with the Sherman Antitrust Act
 created watchdog groups, such as the Interstate
Commerce Commission and the Federal Trade
Commission
 strengthened antitrust legislation with acts such as
the Celler-Kefauver Act of 1950, the Antitrust
Procedures and Penalties Act of 1975, and the
Parens Patriae Act of 1976
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CHAPTER 6
Wrap-Up
1. How does perfect competition differ from
monopolistic competition? Give an example of
each.
2. How are oligopolies different from monopolies?
3. How does a cartel operate? Why are cartels illegal
in the United States?
4. How do oligopolies and monopolies affect product
choice and price?
5. What factors encouraged the U.S. government to
abandon its laissez-faire economic policies in the
1880s?
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