Product

Tic Tacs Jolly Ranchers Air Heads M&M’s

Variety of Goods Identical Slight Slight No Difference

Control over None Some Some Complete

Price
Real World Oranges Big Three Car NFL
Examples (Agriculture) Fast Food Companies (GM,
Ford, Chrysler)
Product
Tic Tacs Jolly Ranchers Air Heads Snickers

Variety of Goods Identical Slight No Difference

Slight

Control over No Some

Price Nearly Complete Complete
Real World Oranges Fast Food Big Three Car NFL
Examples (Agriculture) Companies (GM,
Ford, Chrysler)
Less competitive
 Barriers to Entry –how hard/easy it is to compete
 The level of competition in a market
 Perfect Competition – also known as pure competition, is the simplest and most
competitive market structure; a large number of firms producing identical products
Four Characteristics:
1. Identical Products
2. Many buyers and sellers
3. Market Price (everyone knows the price)
4. No barriers to entry
Important Points:
No firm can control the price
Firms are “price takers”
Price is determined strictly by the market (supply and demand)
Commodity - basic good with little differentiation from one product to
the next with multiple producers selling the same product
Tomatoes/Oranges
Wheat/Corn
Gold/Silver
Beef/Fish
Stock Market
 Monopoly - when one company controls the market of a good/service and can
effectively dictate prices(least competitive)
 Microsoft (90’s), NFL, Comcast, Luxxotica, etc.
 Four Characteristics
1. One Seller
2. No Substitutes
3. “Price Maker”/Market Power
4. Complete Barrier to Entry
 Monopolistic Competition – “little monopolies”, many companies selling similar
products but not identical; brand control
 Examples:
 Jeans
 Fast Food
 Toothbrushes
 Watches
Four Characteristics:
1. Many buyer and sellers
2. Slight control over price
3. Brand Differentiation (main difference
between perfect and monopolistic competition)
4. Low Barrier to Entry
 Oligopoly – a market structure in which a few large firms dominate a market; a few of
the largest firms produce at least 70-80% of the output.
 Automobile industry, commercial airlines, beer industry, oil cartels, web browsers,
smart-phones, etc.
 Four Characteristics:
1. A few firms (2-3)
2. Identical/slightly different products
3. Market Power
4. High Barriers to Entry
 Collusion – businesses work together to price fix, agreement to set prices
 Price Fixing – agreement among firms to sell at the same or very similar prices
 Cartel – a formal organization of producers that fix prices and control supply
(Organization of Petroleum Exporting Countries)