Bus Lines Monopoly A Market Structure Example example essay topic

TYPES OF MARKETS STRUCTURES: Perfect competition = Pure Competition Monopolistic CompetitionOligopolyMonopolyPerfect Competition = - Dosesn't exist Characteristics: Large # of buyers and sellers Homogeneous Product = products have to be the same Perfect Knowledge = all buyers and all sellers know what each are doing Free entry and exit = these people can leave or enter market whenever One price Resources are mobile. Short Run = not enough time for people to make changes Long Run = time to make changes the supply curve is the marginal cost curve above the demand curve Decreasing Cost = type of market people would like to be in. Expansion in numbers, reduction in input costs. Constant Cost = Page 577, constant return Increasing Cost = example, Bus Lines MONOPOLY = a market structure example, Northeast Utilities Characteristics: No Close Substitutes Inelastic product One seller, many knowledge high barriers to enter and leave market resources are not mobile. must be a necessity Problem with Monopolies Monopolies tend to misallocate resources Not as efficient = monopolies work where MC = MR Monopolies will not produce as much as consumer wants Monopolies lack incentives, no competition Ways of Controlling MonopoliesRegulateBreak it upTaxesGood Points of Monopolies Average cost is lower and passes on to the consumer May be the only rational way to offer a product Cartels = example: OPEC - a monopoly, outside of the US Control, deals in a natural resource. Natural monopoly = as you increase your volume - your cost of production goes down, the savings should be passed onto the consumer. Types of Monopolies: Strategic Monopoly = a company that controls a particular input in a product Natural = based on economies of scale Trade Secret = no time limit - because you have not declared a patent. if some on gets your secret, and get a patent for it, you are out of luck.

Patent Monopolies = patent on a product lasts for 17 years. regulated Monopolies = govt give the company the right to be a monopoly, example Gas and Electric companies. But the Govt reserves the right to control your business. Govt allows you to make a FAIR RATE of RETURN. OLIGOPOLY = just a few firms are oligopolies Characteristics: Few sellers - many buyers Interdependence -- very interested in what others are doing Barriers to enter and exit Price is not important Market share IS important. The last thing a Oligopoly wants is a price war Not will to compete in price, more willing to compete for the market share.

Oligopolies use a lot of advertising They will follow a price decrease. A price drop will cause a KIND DEMAND CURVE, page 627 Concentration ratio = sum of the largest 5 firms in sales divided by sum of all the companies. If the total is greater than 75, your company is an oligopoly. How do companies become an oligopoly? Companies can merge - horizontal merger, vertical merger, and conglomerate.

Horizontal merger - companies are interested in merging with companies on the same production levels or retail levels. Vertical Merger = merging of different product lines Conglomerate - a company that has purchased companies that have something in common, example: United Technologies STRATEGIC BEHAVIORS: pertains to oligopolies Assign someone in the industry to be a price leader Have a company that is a barometer company (that has their pulse on the market) Price wares - way of getting market share Increase cost of entering the market May use GAME THEORY (try to out guess the competition) Cooperative Strategy = competition working together Non- Cooperative strategy - working on your own Zero sum, some people will win some will loose but the market, as a whole will not change Negative Sume Game = doing something in the market so everybody will loose Positive Sum Game = market is growing, so whatever you do, everybody will gain. TIME LINE THE FIRST RULES & REGULATIONS PERTAIN TO COMMERCE. 1890 Sherman Act I & II 1914 Clayton Act Federal Trade Commission (FTC) established 1920 FEderal communication Commision (FCC) established due to the invention of Radio. 1930-1947 Depression = These rules and regulations pertain to the labor market. Wagner Act - first time unions are all wed collective bargaining and allowed to unionize.

Taft Hardly Act NLR A - National Labor Relations Act - binding arbitration 1950-1960 = These rules and regulations pertain to Safety. 1958 - Federal Aviation Administration established = airline safety 1960 - OSHA (Occupational Safety Health Administration established = work place safety. 1960-1970 = Enviromental theme for these rules and regulations 1963 - Clean Air Act 1970 - EPA (Environmental Protection Agency) 1973 - Noise pollution act Water Act Super Fund - Government money used to clean up environmental disaster issues. 1970-2001 = Deregulation Acts is the theme of these rules and regulations.

1979 - PUPA, this allows you to generate your own electricity (water wheels or wind mills, etc... ) and sell it the excess back to the electric company. 1978 - Airline Deregulation Act - allows easier entry into the industry, allows for more competition there by lowering prices (unfortunately with all the merges that tended to happen, it did not work as planned) Electric Deregulation - allows easier entry into the industry, allows for more competition there by lowering prices (unfortunately with all the merges that tended to happen, it did not work as planned) Gas Deregulation - allows easier entry into the industry, allows for more competition there by lowering prices (unfortunately with all the merges that tended to happen, it did not work as planned) Telephone Deregulation = allows easier entry into the industry, allows for more competition there by lowering prices (unfortunately with all the merges that tended to happen, it did not work as planned) 2001 - Future = possible theme will be Agencies to control Internet. possible international regulations. Prior to civil ware, there weren't many large companies Second Industrial Revolution -, shipbuilders, steel industry developed.