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Chapter 9 Market Structure and Competition

Chapter 9 Market Structure and Competition. Economics. Market Differences 9A. Isaiah 55:1 and 1 Corinthians 9:25 pg 164

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Chapter 9 Market Structure and Competition

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  1. Chapter 9 Market Structure and Competition Economics

  2. Market Differences 9A • Isaiah 55:1 and 1 Corinthians 9:25 pg 164 • Market: refers to the arrangements that people have developed for trading with one another, and competition is the struggle each firm experiences as it seeks to survive and then thrive within those arrangements. • Industry: a group of businesses that share common concerns. • Number of Firms • Product Differences: differentiated and undifferentiated pg 165

  3. Market Differences 9A • Control of Price • Entering/Exiting the Industry: • Barrier to entry - • Natural barriers to entry – • Artificial barriers to entry – • Andrew Carnegie: biography pg 166 read and discuss

  4. Types of Competition 9B • Perfect Competition: • Number of Firms – Many • Product Differences – undifferentiated product • Control of Price – no individual firm can control the price • Entering/Exiting the Industry – firms may enter or exit the market with ease

  5. Types of Competition 9B • Imperfect Competition: Most Prevalent Form of business type in America today (pg 170-171) • Number of Firms – Many producers of slightly differentiated goods • Product Differences– sell products that are differentiated in some way (packaging, warranty, brand name, flavor, etc.) • Control of Price – slight ability to control price: vis a vis w/ competitors: EX/ Coke vs. Pepsi • Entering/Exiting the Industry – relative ease. Cost of entering/exiting are higher than under perfect competition though.

  6. Types of Competition 9B • Oligopoly: • Number of Firms – Few Firms (tight oligopoly, loose oligopoly, duopoly) • Product Differences – from highly differentiated to undifferentiated • Control of Price – from high to low • Entering/Exiting the Industry – difficult to enter and exit (ex/ car manufacturer: Ford, GM, Ferrari) • Collusion: agreement among competitiors to limit production to increase the price of the good being offered. • Cartel: formalized collusion, example is OPEC.

  7. Types of Competition 9B • Monopoly: • Number of Firms – There can be only “1” (natural monopoly and legal monopoly) • Product Differences – No differences due to no competition • Control of Price – absolute or maximum allowed by government • Entering/Exiting the Industry – entering and exiting (nearly impossible) (Ex/ electric and water company

  8. Antitrust Policy 9C • The Sherman Antitrust Act of 1890: pg 175 • The Clayton Act of 1914: pg 176-177 • Interlocking directorates – • Tying Contracts – • Anticompetitive takeovers – • Price discrimination – • Other Legislation (pg 177): Federal Trade Commission Act of 1914 (to enforce Clayton Act), Robinson-Patman Act (1936), Celler-Kefauver Act (anti-merger act 1950)

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