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CIA 4U0: A Spectrum of Markets

CIA 4U0: A Spectrum of Markets. Mr. T. Perfect Competition. Many sellers of identical product Easy to enter the industry No control over price and no advertising Examples – stock market, agriculture. Monopoly. One seller and no substitutes

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CIA 4U0: A Spectrum of Markets

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  1. CIA 4U0: A Spectrum of Markets Mr. T

  2. Perfect Competition • Many sellers of identical product • Easy to enter the industry • No control over price and no advertising • Examples – stock market, agriculture

  3. Monopoly • One seller and no substitutes • Very difficult or impossible to enter the industry • Price-maker  much control over price • Advertise to improve image • Examples  water, urban transit, (formerly) home phone service

  4. Oligopoly • Two kinds  • Homogeneous: some product distinction • Differentiated: much product distinction • Few sellers and difficult to enter • Some control over price • Much advertising for differentiated • Automobiles, cable TV/Internet are differentiated • Steel, cement are homogeneous • Gasoline is homogeneous, but pretends to be differentiated.

  5. Monopolistic Competition • Many sellers with some product distinction • Easy to enter the industry, but a little control over price • Lots of advertising • Examples  Fast food, clothing

  6. Concentration In Canadian Industry • Concentration ratio measures the proportion of industry’s sales by top 4 and top 8 • If the top 4 businesses make up most of the market, concentration is very high  There is little competition • If the top 8 businesses make up most of the market, concentration is still quite high, and there is room for more competition. • Tobacco, oil, mobile telephones, and transportation equipment have little competition in Canada

  7. A Sporting Example • In terms of professional sports, there is also very little competition (except on the playing field) • Teams like the New York Yankees, The Toronto Maple Leafs, The Los Angeles Lakers, Manchester United FC all have a large market advantage over their competitors. • They all compete in large markets against other teams (businesses) who are operating in small markets. • It is virtually impossible for the Carolina Hurricanes to ever make more money as a business than the Toronto Maple Leafs. • As a result, the NHL restricts this competition by including revenue sharing, and a salary cap.

  8. Restricting Competition • Unfair competition – Trademark infringement • Establishing a cartel - • Interlocking directorates • Mergers - • Establishing a holding company • Horizontal, vertical, conglomerate

  9. Advantages Of Large-Scale Operations • Money available for research to develop new and better products and more efficient, cheaper production methods • Large quantity production allows for specialized machinery (capital) and labour (human) that increases efficiency and lowers cost (e.g. automobiles)

  10. Government Regulation • Government Ownership – natural monopolies • Laws to promote competition • Regulation of prices and services • Why do governments do this?

  11. Monopsony et al…. • “ony” – buyer • “oly” – seller • Monopsony – one seller, many buyers • Duopoly – two sellers, many buyers (pepsi vs. coke; rogersvid vs. blockbuster • Duposony – two buyers, many sellers • Triopoly – three sellers, many buyers (chrysler, gm, ford)

  12. Markets cont. • Triopsony – three buyers, many sellers

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