Need Economics Help, Again :)

[Shooter Grrl]

Okay, so here I am in my freakin 5th economics class (does it ever end - I'm not even an economics major!)

Anyways, I have to find examples of firms that are a monopoly, an oligopoly, a monopolistic competition and a perfect competition. Trouble is, I'm not even sure what these are

So please explain the differences and help me figure out examples of firms to use.

[rtr]

A monopoly occurs when only one firm sells a particular product or service, Microsoft is a historical example so is AT&T.

Oligopoly means there are very few firms competing to sell a particular product or service, cable/satellite television is a good example of this, most markets have one cable provider and the two major satellite providers (dish and directtv).

http://en.wikipedia.org/wiki/Monopolistic_competition

http://en.wikipedia.org/wiki/Perfect_competition

Wikipedia also has info on monopoly and oligopoly.

[Shooter Grrl]

Thanks - but wikipedia isn't detailed enough for what I need I've read everything, and have the basics down, it's the nitty gritty details I'm stuck on.

[rtr]

What do you need to know?

[Shooter Grrl]

Prepare a table that compares and contrasts the various elements of the four market structures. Format the table as follows:

1) Column headings should be the four market structures:

Perfect competition

Monopoly

Monopolistic competition

Oligopoly

2) Use the following row headings to help explain the basis for your market characterization:

An example of a firm

Goods or services produced by the firm

Barriers to entry

Numbers of firms

Price elasticity of demand

Economic profits (Is there a presence of economic profits? Yes or no.)

That's the start of my assignment. I then have to write a paper justifying my answers!

[davidball]

Oligopoly - high concentration ratio, that is, 4 - 6 firms control a large percent (75+) of the market. This is a general guideline as economists differ as to whether it is 4 firms controlling 70% of the market or 6 firms controlling 80% of the market. Classic examples are breakfast cereal (Kellogs, General Mills, Post, Quaker Oats), soft drinks (Coca Cola, Pepsi, etc.), airlines, and (formerly) automobiles (when the U.S. was dominated by the "big three"). Oligopolies have a temptation to collude (illegal) and fix prices.

Monopolistic competition has more firms in the market, nearly identical products. Fast food (pizza - Dominoes, Papa John, Pizza Hut, Noble Roman's, Donato's, etc.) and clothing (Abercrombie, etc.) are common examples.

Both of the above compete by product differentiation - "better ingredients, better pizza, Papa John's". They tell us why their product (isn't all pizza basically crust, tomato sauce, cheese and toppings) is different than the others and why, therefore, we should buy theirs.

Perfect competition is rare if not impossible. Requirements are 1) many buyers 2) many sellers 3) identical products 4) no barriers to entering the market and 5) perfect information - everyone knows there are lots of buyer, sellers and that every product is identical. This means the forces of supply and demand determine price and everyone must sell at that price because if they raise their price - bam - they sell nothing because everyone buys from someone else. Products in this market would be agricultural products (corn is corn is corn) and other "commodities" (minerals - iron ore, etc.).

[rtr]

Oligopolies and monopolies will make an economic profit, in perfect competition the companies will eventually not make a profit.

[Shooter Grrl]

What kind of barriers to entry are there for oligopolies?

[AlamoShooter]

This sounds like when I would get girls for my buddy,

[Shooter Grrl]

Perfect Competition Monopoly Monopolistic Competition Oligopoly

Example Aventis Pharma Pizza Hut Kellogs

Product Lantus (long lasting insulin) Pizza Breakfast Cereal

Barriers None Extreme barriers - prevents entry Easy entry in the long run Extreme barriers - prevents entry

Number of Firms Unlimited One Many sellers 4 to 6

Price Elasticity of Demand Elastic Inelastic Elastic Inelastic

Economic Profits? No Yes No Yes

Kinda hard to read - but there's my answers - how'd I do?

[davidball]

Kinda hard to read - but there's my answers - how'd I do?

Looks pretty good . . . I'm not sure what is meant by "economic" profits, but otherwise you are OK.

I don't know if this will help, but this is the grid I use to discuss this topic with my high school economics students.

21_Market_Structure___Plan2.doc

[Shooter Grrl]

Thanks David - I just have one last question, and it's a doozy

What are the advantages and limitations of supply and demand for each of these?

[davidball]

What are the advantages and limitations of supply and demand for each of these?

I'm not sure I exactly understand the question, especially with regard to "advantages and limitations", but here's what I can tell you:

In a structure of perfect competition, price is determined by supply and demand. Firms in this structure select a level of output that will maximize profits at that given price. This level is where marginal cost of production equals the given price. I'm not sure how this relates as an advantage or limitation.

Through advertising, promotions, etc., firms in a monopolistic competition structure attempt to increase their firm's demand curve within the market, and the market demand curve as a whole. This is similar in an oligopoly structure, but firms here tend to be interdependent - one cannot raise or lower price with the others "taggin along."

In a monopoly, the monopolistic firm is the only supplier and therefore has the advantage of completely controlling supply, and therefore, price.

Hope this helps . . . I'm not sure it directly answers the question.

[Flexmoney]

What kind of barriers to entry are there for oligopolies?

What does it take to start a General Motors or a Delta?

Access to $$, skilled labor, distribution network, marketing, supply network, specific knowlege, R&D budget, goverernment regulation...