Download Name_________________________________ December 8

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December 8-9, 2016
Warm Up #7
Why do you think that competition is important?
What do consumers gain as a result of competition?
What are price ceilings? Draw a picture of an effective price ceiling.
Homework Due Today- Supply & Demand Practice (put in late bin and write absent on yellow slip)
There is a QUIZ today on Supply & Demand, Market Structures (Notes Below). You will need to make it up ASAP.
Must be done before Winter Break. Tutoring Tuesday/Thursday AM at 8:15
Amendment of the Week- 10th
“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are
reserved to the States respectively, or to the people.”
The Tenth Amendment was included in the Bill of Rights to further define the balance of power between the federal
government and the states. The amendment says that the federal government has only those powers specifically granted by
the Constitution. These powers include the power to declare war, to collect taxes, to regulate interstate business activities
and others that are listed in the articles.
Any power not listed, says the Tenth Amendment, is left to the states or the people. Although the Tenth
Amendment does not specify what these “powers” may be, the U.S. Supreme Court has ruled that laws affecting family
relations (such as marriage, divorce, and adoption), commerce that occurs within a state’s own borders, and local law
enforcement activities, are among those specifically reserved to the states or the people.
Notes: Market Structures
Benefits of Competition
1. Forces producers to operate efficiently
2. Lowers prices
3. Improves quality of goods & services
4. Increases choices for consumers
5. Forces producers to be innovative
Vocabulary Industry: consists of all firms (businesses) making similar or identical products.
 An industry’s market structure depends on the number of firms in the industry and how they compete.
 Market Power: how much control that a business has over manipulating the price by manipulating the supply.
 Barriers to Entry: Factors that prevent or make it difficult for new firms to enter a market.
o Startup cost, location (natural resources), competition, government power, patents, etc.
Perfect Competition
Many
None
None
Monopolistic Competition
Oligopoly
(Number of Firms)
(Firm’s influence of Price/Market Power)
(Barriers to Entry)
Monopoly
One
All
Impossible
Perfect Competition
 Many small firms
 Homogenous product (Perfect Substitute)
 No barriers to entry
 No market power
 Price takers
o Agricultural markets closest example today
Monopolistic Competition
 Many competing firms
 Slightly differentiated product with close substitutes available
 Few barriers to enter the market
 Some market power
 Rely on advertisement
 Profit maximizers / Price-Maker
o makeup, toilet paper, clothing companies, restaurants

Majority of industries fall within Monopolistic Competition. Some
firms are going to have more market power than others.
Oligopoly
 Small number of firms
 Lots of market power
 Slightly differentiated products
 Many barriers to enter
 Mutually Dependent: individual producers can impact the market.
 Strategic pricing/ marketing
 Tactics Oligopolies Sometimes Use:
o Collusion: secret agreement between firms to limit
competition & gain unfair market advantages
o Predatory Pricing: deliberately lowering prices to force
competition out of the market.
Monopoly
 ONE firm
 Unique product
 Total market power = Price Maker
 can be very harmful for consumers
 Anti-Trust Laws- gov. regulations to control the powers of monopolies
 Reasons for the existence of a monopoly:
o Extreme barriers to enter, high cost, gov. licensing, gov.
grants, gov. patents, brand loyalty, advertising
 Natural Monopoly:
o Happens when competition is NOT the best alternative
o firm that produces the entire output of a market at a lower
cost than if there were several firms.
 Ex) Utilities (Water, Power, Natural Gas)