Economics Chapter 7 Market Structures

Market Structures Overview

• Laissez-faire advocates minimal government interference in business operations.
• Market structure defines the competitive landscape among firms within an industry.

Types of Market Structures

• Perfect competition involves numerous buyers and sellers trading identical products with full information.
• Imperfect competition fails to meet the criteria of perfect competition.
• Monopolistic competition resembles perfect competition but features differentiated products.

Key Concepts in Competition

• Product differentiation creates perceived or actual differences among similar products.
• Nonprice competition emphasizes attributes like quality or design rather than pricing strategies.

Oligopoly and Monopolies

• Oligopoly consists of a few dominant sellers controlling the market.
• Collusion is an illegal practice where producers conspire to manipulate prices or market shares.
• Price-fixing refers to firms agreeing to maintain the same product price unlawfully.
• Monopoly is characterized by a single seller of a unique product, exerting significant market control.

Types of Monopolies

• Natural monopoly occurs when production costs are minimized under a single supplier.
• Geographic monopoly exists when a firm holds exclusive market power in a specific area.
• Technological monopoly is based on proprietary processes or advancements owned by a firm.
• Government monopoly is a monopoly owned by state authorities.

Economic Concepts

• Economies of scale reduce average production costs as a firm increases its size and output.
• Market failure happens when competitive markets cannot function effectively.
• Public goods are services available to all, funded collectively, benefiting everyone.

Externalities

• Externality refers to secondary effects impacting third parties uninvolved in a transaction.
• Negative externality results in adverse effects on uninvolved parties, such as pollution.
• Positive externality yields benefits to third parties, like education enhancing community skills.

Regulatory Concepts

• Trust is an illegal alliance of businesses designed to restrict competition.
• Price discrimination is the strategy of selling identical goods at varying prices based on buyer segmentation.
• Cease and desist order mandates companies to halt unfair practices harming competition.
• Public disclosure laws require businesses to transparently share information regarding their operations and products.