Monopolies

In a short paragraph, identify a company you think is a monopoly and explain why.

Monopolies • On a sheet of paper, identify the first space (excluding

the corner spaces) you try to acquire on the Monopoly® board to win the game. If you do not have a space, pick one and answer the questions that follow.

• Why do you choose this space? • What is your next strategy to win the game?

Competition and Market Structures

Ch7 sec1

• Adam Smith-Wealth of Nations (1776), 18th century Scottish economist

Adam Smith…

• Laissez-faire, “let it be”, government should not interfere with commerce or trade.

Markets are classified according to certain structural characteristics:

“Market Characteristics”

Perfect/Pure Competition

This market situation includes independent and well-informed buyers and sellers of exactly the same economic product.

Monopolistic Competition

A market structure that has all the conditions of perfect competition except identical products.

Oligopoly

A market situation in which a few very large sellers of a product dominate is known as oligopoly.

Ex. Pepsi and Coke, McDonald's, Burger King, and Wendy's dominate the fast-food industry

Oligopolies

• Oligopolies have Interdependent Behavior-Whenever one firm does something, the other firms usually follow.

Pricing Behavior-oligopolies

– Collusion, a formal agreement to set prices or to otherwise behave in a cooperative manner.

– Price-fixing/Guarantee sales agreeing to charge the same or similar prices for a product-or divide market

Monopoly

A pure monopoly is a market situation with only one seller of a particular economic product that has no close substitutes. U.S. has few.

• Natural Monopoly

A natural monopoly-a market situation where costs are minimized by having a single firm produce the product.

• Geographic Monopoly

A business has a monopoly simply because of location-one type business in a small town.

• Technological Monopoly-the special privileges given to those who invent a new product or process

• Patent-good for 20 years

• Copyright-lifetime plus 50 years

• Government Monopoly

Government monopolies are found at the national, state, and local levels. In most cases, they involve products people need that private industry may not adequately provide.

Only one allowed in a specific area!

Warm Up

Define a monopoly and an oligopoly?

Characteristics of Market Structures

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition

Monopolistic

Competition

Oligopoly

Pure

Monopoly

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most

Monopolistic

Competition

Oligopoly

Pure

Monopoly

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most

Monopolistic

Competition Many

Oligopoly

Pure

Monopoly

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most

Monopolistic

Competition Many

Oligopoly Few

Pure

Monopoly

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most

Monopolistic

Competition Many

Oligopoly Few

Pure

Monopoly One

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most None

Monopolistic

Competition Many

Oligopoly Few

Pure

Monopoly One

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most None

Monopolistic

Competition Many Limited

Oligopoly Few

Pure

Monopoly One

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most None

Monopolistic

Competition Many Limited

Oligopoly Few Some

Pure

Monopoly One

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most None

Monopolistic

Competition Many Limited

Oligopoly Few Some

Pure

Monopoly One Extensive

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most None None

Monopolistic

Competition Many Limited

Oligopoly Few Some

Pure

Monopoly One Extensive

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most None None

Monopolistic

Competition Many Limited Fair

Amount

Oligopoly Few Some

Pure

Monopoly One Extensive

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most None None

Monopolistic

Competition Many Limited Fair

Amount

Oligopoly Few Some Fair

Amount

Pure

Monopoly One Extensive

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most None None

Monopolistic

Competition Many Limited Fair

Amount

Oligopoly Few Some Fair

Amount

Pure

Monopoly One Extensive None

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most None None None

Monopolistic

Competition Many Limited Fair

Amount

Oligopoly Few Some Fair

Amount

Pure

Monopoly One Extensive None

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most None None None

Monopolistic

Competition Many Limited Fair

Amount

Fair

Amount

Oligopoly Few Some Fair

Amount

Pure

Monopoly One Extensive None

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most None None None

Monopolistic

Competition Many Limited Fair

Amount

Fair

Amount

Oligopoly Few Some Fair

Amount

Some

Pure

Monopoly One Extensive None

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most None None None

Monopolistic

Competition Many Limited Fair

Amount

Fair

Amount

Oligopoly Few Some Fair

Amount

Some

Pure

Monopoly One Extensive None None

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most None None None Very Easy

Monopolistic

Competition Many Limited Fair

Amount

Fair

Amount

Oligopoly Few Some Fair

Amount

Some

Pure

Monopoly One Extensive None None

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most None None None Very Easy

Monopolistic

Competition Many Limited Fair

Amount

Fair

Amount

Easy

Oligopoly Few Some Fair

Amount

Some

Pure

Monopoly One Extensive None None

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most None None None Very Easy

Monopolistic

Competition Many Limited Fair

Amount

Fair

Amount

Easy

Oligopoly Few Some Fair

Amount

Some Difficult

Pure

Monopoly One Extensive None None

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most None None None Very Easy

Monopolistic

Competition Many Limited Fair

Amount

Fair

Amount

Easy

Oligopoly Few Some Fair

Amount

Some Difficult

Pure

Monopoly One Extensive None None Almost Impossible

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most None None None Very Easy Perfect:

None

Monopolistic

Competition Many Limited Fair

Amount

Fair

Amount

Easy

Oligopoly Few Some Fair

Amount

Some Difficult

Pure

Monopoly One Extensive None None Almost Impossible

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most None None None Very Easy Perfect: None

Monopolistic

Competition Many Limited Fair

Amount

Fair

Amount

Easy Gas Stations

Oligopoly Few Some Fair

Amount

Some Difficult

Pure

Monopoly One Extensive None None Almost Impossible

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most None None None Very Easy Perfect: None

Monopolistic

Competition Many Limited Fair

Amount

Fair

Amount

Easy Gas Stations

Oligopoly Few Some Fair

Amount

Some Difficult

Autos

Fast Food-Burgers

Pure

Monopoly One Extensive None None Almost Impossible

Number of Firms in Industry

Influence over Price

Product

Differentiation

Advertising Entry Into the

Market

Examples

Perfect

Competition Most None None None Very Easy Perfect:

None

Monopolistic

Competition Many Limited Fair

Amount

Fair

Amount

Easy Gas Stations

Oligopoly Few Some Fair

Amount

Some Difficult

Autos

Fast Food-Burgers

Pure

Monopoly One Extensive None None Almost Impossible

Perfect: None

PembrokenopolyAssignment Part 1: Create a 40 space Monopoly® board. Substitute local/regional businesses and utilities for those on the original Monopoly® board. If possible, try to include (and group) all of the various types of monopolies and oligopolies discussed in Chapter 7 section 1. Also be prepared to identify and explain all previously discussed business organizations such as sole proprietorships, partnerships, etc.Design, color, and layout your Pembrokenopoly board just as the original is constructed.All designs must be school appropriate.