Ch. 7: A Spectrum of Markets

GR. 11 ECONOMICS (CIE3M1)M. Nicholson

Perfect Competition

Many sellers of identical product Easy to enter the industry No control over price and no

advertising Examples – stock market,

agriculture

Monopoly

One seller and no substitutes Very difficult or impossible to enter

the industry Price-maker much control over

price Advertise to improve image Examples water, urban transit,

cable

Oligopoly

Homogeneous: some product distinction Differentiated: much product distinction Few sellers and difficult to enter Some control over price Much advertising for differentiated Automobiles, beer differentiated Steel, cement homogeneous

Monopolistic Competition

Many sellers with some product distinction

Easy to enter the industry, but a little control over price

Lots of advertising Examples Fast food, clothing

Concentration In Canadian Industry

Concentration ratio measures the proportion of industry’s sales by top 4 and top 8

Tobacco, oil and transportation equipment have little competition

Restricting Competition

Unfair competition Establishing a cartel Interlocking directorates Mergers Establishing a holding company Horizontal, vertical, conglomerate

Advantages Of Large-Scale Operations

Money available for research to develop new and better products and more efficient, cheaper production methods

Large quantity production allows for specialized machinery (capital) and labour (human) that increases efficiency and lowers cost (e.g. automobiles)

Government Regulation

Government Ownership – natural monopolies

Laws to promote competition Regulation of prices and services