Download Market Structures - McEachern High School

Market Structures &
Types of Businesses
Essential Standards
The student will analyze the four
types of market structures in the US
economy.
 The student will identify the basic
characteristics of monopoly,
oligopoly, monopolistic
competition and pure
competition.

Perfect Competition
 In a “perfect” or “purely”






competitive market…
Many thousands (or more)
sellers compete to sell an
identical product.
The best example of a
business that operates in
such a market is…
Farming—
There are millions of tomato
farmers around the world…
Tomatoes tend to be
IDENTICAL…
And it is VERY EASY for new
tomato growers to break into
this business.
Monopolistic Competition
 In a monopolistically competitive










market—
There are MANY sellers competing
to sell a SIMILAR product.
A good example of a business that
operates in this kind of market is…
A fast food company.
Buyers have dozens and dozens of
options—
And fast food is all very similar.
In selling a SIMILAR product, such
businesses must highlight SMALL
DIFFERENCES—
In a process called PRODUCT
DIFFERENTIATION—
In order to attract customers.
They do this through…
Advertising.
Oligopoly
 Oligopolies exist when






there are only a few
major competitors rule
the market.
There are several
oligopolies based in
Atlanta:
DELTA…
Coca Cola…
UPS.
Again, these products are
VERY SIMILAR—
The difference is that it
is VERY HARD for a new
business to break into an
Oligopoly.
Firms that operate within
perfectly competitive markets
tend to have...
A.) a large amount of control over the price of
their product.
B.) minimal control over the price of their
product.
C.) an employment structure that offers high
salaries and good benefits.
D.) very large advertising budgets.
In Douglasville, GA, three supermarkets
control the entire market for groceries in
that city. Which is the BEST description of
the market structure for groceries in the city
of Douglasville?
A.) perfect competition.
B.) oligopolistic competition.
C.) monopolistic competition.
 Monopolies exist when









buyers have ONE OPTION.
When I moved to Marietta in
2005, I had ONE OPTION for
cable television:
Comcast.
However, I noticed that
nearly every time I got a
bill—
The bill was SLIGHTLY
HIGHER.
This is what monopolies
DO—
Why?
Because they CAN.
Luckily, new technology has
destroyed Comcast’s
monopoly—
And it now must offer better,
cheaper service, or it will
disappear.
Monopoly
BUSINESS TYPES
 The
student will explain the
organization and role of
business.
 The student will compare and
contrast three forms of business
organization—sole
proprietorship, partnership,
and corporation.
Sole Proprietorship
 This business is owned





and operated by ONE
PERSON…
They are EASY to start
up…
And offer FULL
CONTROL…
However, sole proprietors
are exposed to
UNLIMITED LIABILITY…
Meaning that if they
borrow money for their
business, and their
business fails—
They could lose
EVERYTHING.
Partnerships
 A business owned and
controlled by two or
more people…
 Partnerships also offer
easy start up and full
control…
 They also offer
SPECIALIZATION.
 However, they too are
exposed to UNLIMITED
LIABILITY—
 And they tend to break
up over money
disputes.
Corporations
 This type of business is






owned by STOCKHOLDERS…
If a Microsoft has a good
year, the value of its stock…
RISES…
If they have a bad year,
stock value…
Falls.
Corporate shareholders
benefit from LIMITED
LIABILITY…
If their company goes
bankrupt, they only lose the
value of the stock they own.
Other Types of Organizations
 Franchises—businesses that are
owned separately but have the
same name. Example—
McDonald’s.
 McDonald’s franchisees typically
need to have $750,000 in the bank
before being considered.
 They must submit to corporate
control—
 And pay a monthly FEE—
 But they receive valuable
advantages over independent
restaurant owners.
 Non-profit organization—a
business with goals other than
profits. Example—the Red Cross.