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Four Main Types of MarketsChapter 7
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• Tap water• Last chance for gas 50 miles
Monopoly
• Restaurants• Jeans
MonopolisticCompetition
• Tennis balls• Crude oil
Oligopoly
Number of Sellers?
Perfect
• Wheat• Milk
Competition
Type of Products?
Identicalproducts
Differentiatedproducts
Onefirm
Fewfirms
Manyfirms
Characteristics define Type of Market
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Characteristics of Markets:
•Market structures are defined by their characteristics:
1. Number of sellers in the market2. Type of product that sellers sell
• Are they identical or somewhat different?
3. Ease of entry into the market easy or difficult• Are there barriers to entry?
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Barriers to Entry Into Markets:
1. Need for large financial resources2. High brand equity (the value of
having a well known brand)• consumers will spend more to
buy Coca Cola than the store brand
3. Legal barriers• copyrights and patents
4. Economies of scale• extremely low average total
costs5. Exclusive ownership of a scarce
resource• Alcoa owned nearly all sources
of bauxite
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A Perfectly Competitive Market
o In a Perfectly Competitive Marketo SELLERS: The market has many
buyers and many sellerso PRODUCTS: All firms sell identical
goodso PRICE: Price takers meaning they
can only sell goods at the equilibrium price
o ENTRY: Firms have easy entry into and exit out of the market
EOC study guide
Microeconomics #6
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A Perfectly Competitive Market
o Examples: o Wheat farmerso Makers of latex balloonso Apple growers
o Video clip of perfect competition
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A Monopolistic Market
o Characteristics of a Monopolyo SELLERS: The market consists of one sellero PRODUCT: The single seller sells a product
that has no close substituteso PRICE: price makers they “search” for
the price that generates the most profito ENTRY: The barriers to entry are high,
which means that entry into the market is extremely difficult
Shopping in Bethel, Alaska
EOC study guide
Microeconomics #5
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A Monopolistic Market
o Examples: o “Last chance for gas in 100 miles"o Movie theatre foodso One ferry that goes to an island
without a bridgeo The only cable company in town
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A Monopolistic Competitive Market
o In a Monopolistic Competitive Market:o SELLERS: The market includes many
buyers and many sellerso This is where the “competitive” comes in
o PRODUCT: Firms produce and sell slightly differentiated productso This is where the “monopolistic” comes in
o PRICE: price searcherso ENTRY: Firms have easy entry into
and exit out of the market
EOC study guide
Microeconom
ics
#8
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A Monopolistic Competitive Market
o Examples: o Computer gameso CDs
o Video clip of monopolistic competition
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An Oligopolistic Market
o Characteristics of an Oligopoly:o SELLERS: It has few sellerso PRODUCTS: Firms produce and
sell either identical or slightly differentiated products
o PRICE: Price searcherso ENTRY: The barriers to entry are
significant—it is difficult to enter
EOC study guide
Microeconomics #7
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An Oligopolistic Marketo Examples:
o Car manufacturerso Breakfast cerealso Cigarette manufacturers
o Video on oligopoly (end at 3:30)
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Perfectly Competitive
Monopoly Monopolistic Competitive
Oligopoly
# of sellers
Many One Many Few
Type of Product
Identical No close substitutes
Differentiated Identical or Differentiated
Ease of entry into market
Easy Hard Easy Hard
