Ch 13 14 15 Final SA old stuff SA newer stuff SA brand new Problem Solving Market Structures compare and contrast final Perfect Competition cid 127 Monopolistic Competition cid 127 Oligopoly cid 127 Monopoly Examples of Market Structure sushi products are distinct Features of Market Structures cid 127 Market Size cid 127 Market Power Product Differentiation Barriers to Entry Long Run Economic Profit Perfect Competition family farm nothing distinct or unique about your product and you are completely subject to what the market wants to do price taker cid 127 Monopolistic Competition fast food firms don t really have market power lots of competition BUT if you re in the mood for pizza you won t get cid 127 Oligopoly airlines has competition but it s only a few firms ex if united comes out with big sale other airlines will do something similar but airlines are not really considered competitive industry you could not compete against any airline without significant amounts of money and time you have to get airplanes gates etc There are barriers to getting involved not a lot of competitors but fierce competition cid 127 Monopoly microsoft used to be a monopoly but now not everybody needs windows because apple and others only they can produce windows though which gives them power at t was also a monopoly previously google Perfect Competition Monopolistic Competition Oligopoly Monopoly Many firms no one Many firms large market Few firms auto making One single firm google has any meaningful power NONE If u raise corn price NONE If McD s comes with Some but still Significant If microsoft you ll have extra corn something new barely any degree of fierce competition crashes power you still need computer Product Identical Products if you do Differentiated Products Differentiated Products Unique Product Differentiation something diff theres other Artificial but meaningful diff firms NO Barriers NO Barriers Significant Barriers Effective Barriers Market Size Market Power Barriers to Entry Long Run Economic Profit No prospects No prospects Reasonably Likely Reasonably Likely First two columns very similar EXCEPT product differentiation Barriers To Entry NATURAL MONOPOLY Economies of Scale cable add more and more units at average falling cost as long as its falling in range of market then you re hard to compete against Government imposed barriers drugs if you invent the next best painkiller you have exclusive rights Given window tylenol is only one who can create it but eventually other markets can enter patents have a life span Resource based barriers diamonds in Australia if places where these resources exist are limited monopoly Network Effects sometimes the size of the market share impacts the effectiveness of product if you re the only one on Facebook doesn t matter but if most of your friends are on fb you ll pick it If you have a Microsoft windows pc and so do a lot of people what will software producers make windows The more popular a platform gets the more useful the product is and the more people contribute to that products dec competition Transitioning to Long Run Price will drop till it hits bottom of bowl shop All 3 meet at a point economic profits are the blue line they disappear profit maximizing where mc crosses demand We can still have accounting profits cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 Perfect Competition In the long run the absence of barriers to entry or exit guarantees that super profits will disappear In the long run P minimum ATC cid 127 cid 127 cid 127
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