Chapter 5 - Perfect competition. In this chapter you will: Consider the four market structures, and the main differences among them; learn about the profit-maximizing rule and how perfectly competitors use it in the short run; examine how perfect competitive markets adjust in the long run, and the benefits they provide to consumers. | Understanding Economics 2nd edition by Mark Lovewell and Khoa Nguyen Chapter 5 Perfect Competition Copyright © 2002 by McGraw-Hill Ryerson Limited. All rights reserved. Copyright © 2002 by McGraw-Hill Ryerson Limited. All rights reserved. Chapter Objectives In this chapter you will: Consider the four market structures, and the main differences among them. Learn about the profit-maximizing rule and how perfectly competitors use it in the short run. Examine how perfect competitive markets adjust in the long run, and the benefits they provide to consumers. * Copyright © 2002 by McGraw-Hill Ryerson Limited. All rights reserved. Market Structures There are four main market structures perfect competition monopolistic competition oligopoly monopoly * Copyright © 2002 by McGraw-Hill Ryerson Limited. All rights reserved. Perfect Competition Perfectly competitive markets have three main features many buyers and sellers a standard product easy entry and exit * Copyright © 2002 by McGraw-Hill . | Understanding Economics 2nd edition by Mark Lovewell and Khoa Nguyen Chapter 5 Perfect Competition Copyright © 2002 by McGraw-Hill Ryerson Limited. All rights reserved. Copyright © 2002 by McGraw-Hill Ryerson Limited. All rights reserved. Chapter Objectives In this chapter you will: Consider the four market structures, and the main differences among them. Learn about the profit-maximizing rule and how perfectly competitors use it in the short run. Examine how perfect competitive markets adjust in the long run, and the benefits they provide to consumers. * Copyright © 2002 by McGraw-Hill Ryerson Limited. All rights reserved. Market Structures There are four main market structures perfect competition monopolistic competition oligopoly monopoly * Copyright © 2002 by McGraw-Hill Ryerson Limited. All rights reserved. Perfect Competition Perfectly competitive markets have three main features many buyers and sellers a standard product easy entry and exit * Copyright © 2002 by McGraw-Hill Ryerson Limited. All rights reserved. Monopolistic Competition Monopolistically competitive markets have three main features many buyers and sellers slightly different products easy entry and exit * Copyright © 2002 by McGraw-Hill Ryerson Limited. All rights reserved. Oligopoly and Monopoly In an oligopoly a few businesses (protected by entry barriers) provide standard or similar products. In a monopoly a single business (protected by entry barriers) provides a product with no close substitutes. * Copyright © 2002 by McGraw-Hill Ryerson Limited. All rights reserved. Entry Barriers There are six main entry barriers in oligopolies and monopolies increasing returns to scale market experience restricted ownership of resources legal obstacles (such as patents) market abuses (such as predatory pricing) advertising (which is most common in oligopolies) * Copyright © 2002 by McGraw-Hill Ryerson Limited. All rights reserved. Market Power Market power is a business’s ability to affect the price it
