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Types of Competition
Chapter 7
Perfect Competition
Many sellers –
Similar Products
– dry cleaners
– agriculture
Easy entry
No control over price –
– market is controlled by supply and demand
Monopolistic Competition
Large number of sellersSimilar but slightly different products – toothpaste,
clothing, cosmetics
Relatively Easy Entry
some control over price – can raise prices without
loss of customers
Non-price competition
– product differences
– advertising
An industry dominated by a few suppliers
that exercise some control over price.
– Automobile industry – U.S. big three
– cereal companies
Substantial barriers to entry
– customer loyalty
– excessive capital
Non – price competition
Identical or slightly different products
Limited control over price– any company can raise or lower its price but the
other competitors react.
Single seller
No Substitutes
Complete Control of the Market Price by
controlling supply
No entry for competition
U.S. tries to prevent
Natural Monopoly
Due to high costs it is cost efficient to have only
one provider
Utilities- gas, electricity etc.