Shooter Grrl Posted February 13, 2006 Share Posted February 13, 2006 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. Link to comment Share on other sites More sharing options...
rtr Posted February 13, 2006 Share Posted February 13, 2006 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. Link to comment Share on other sites More sharing options...
Shooter Grrl Posted February 13, 2006 Author Share Posted February 13, 2006 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. Link to comment Share on other sites More sharing options...
rtr Posted February 13, 2006 Share Posted February 13, 2006 What do you need to know? Link to comment Share on other sites More sharing options...
Shooter Grrl Posted February 13, 2006 Author Share Posted February 13, 2006 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! Link to comment Share on other sites More sharing options...
davidball Posted February 13, 2006 Share Posted February 13, 2006 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.). Link to comment Share on other sites More sharing options...
rtr Posted February 13, 2006 Share Posted February 13, 2006 Oligopolies and monopolies will make an economic profit, in perfect competition the companies will eventually not make a profit. Link to comment Share on other sites More sharing options...
Shooter Grrl Posted February 13, 2006 Author Share Posted February 13, 2006 What kind of barriers to entry are there for oligopolies? Link to comment Share on other sites More sharing options...
AlamoShooter Posted February 13, 2006 Share Posted February 13, 2006 This sounds like when I would get girls for my buddy, Link to comment Share on other sites More sharing options...
Shooter Grrl Posted February 13, 2006 Author Share Posted February 13, 2006 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? Link to comment Share on other sites More sharing options...
davidball Posted February 14, 2006 Share Posted February 14, 2006 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 Link to comment Share on other sites More sharing options...
Shooter Grrl Posted February 14, 2006 Author Share Posted February 14, 2006 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? Link to comment Share on other sites More sharing options...
davidball Posted February 14, 2006 Share Posted February 14, 2006 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. Link to comment Share on other sites More sharing options...
Flexmoney Posted February 14, 2006 Share Posted February 14, 2006 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... Link to comment Share on other sites More sharing options...
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