2. Know the four types of monopolies. [Government, Natural, Technology, and Geographic]
Market Structure Vocabulary
I. Perfect Competition – has a very large number of sellers (hundreds or thousands) of the same product (any agriculture or fishery product). They are all selling the same undifferentiated products (oranges).
20 Monopolistic Competition – fairly large
number (25-75) of sellers competing to sell
slightly differentiated products. Product
differentiation (real or imaginary) is vital.
This is the most common market structure.
This is the most common market structure – over 99% of all firms. Monopolistic Competition and Price
There is some control over price because
differentiation creates buyer loyalty [jeans].
Non-price competition is used to control price. Developing brand name loyalty will enable a firm to marginally increase price without losing customers. If the increase is too much, buyers will switch to a competitor’s product. 24 Oligopoly – “the chosen few”
(3 or 4) firms control 70% of the market.
Four Market Conditions For Oligopolies
1. A few sellers control over 70% of market.
2. Firms offer identical or differentiated
3. Product information must be easily available. They
use informative advertisement (price, quality, and
special features) to introduce new products.
4. There are huge barriers to entry into the industry.
The three major barriers are technological
knowledge, money, & brand name loyalty.
Entry is difficult because many have patents or own essential raw materials. This makes it difficult for new firms to try to compete.