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LAWTON, Okla.-Strange moments for a local restaurant Friday night when one patron couldn't pay for her dinner or drinks. Police say Kristi Rhines ordered several alcoholic drinks and food at El Chico in Lawton but later said she had no way to pay for them. She told managers her husband was on his way to pick up the tab. When asked about her husband, she told them she was legally married to Jesus Christ, but had no marriage license. She also told management that Jesus would be able to walk in and produce U.S. currency to pay for her bill. Police confirmed that Rhines had no way of paying for her tab. She was booked into the Lawton City Jail on a complaint of fraud.

Woman arrested claiming Jesus Christ will pay her

restaurant tab

Market StructuresChapter 7

“Market Structures”• Terms used to describe the level of competition in a market.

• Perfect Competition

• Imperfect Competition•Monopoly•Monopolistic Competition• Oligopoly

Characteristics of Perfect Competition

• 1. Many buyers and sellers: – A large number of buyers and sellers

ensures that no one controls prices.

Characteristics of Perfect Competition

• 2. Standardized product: – All products are essentially the same.

Characteristics of Perfect Competition

• 3. Freedom to enter and exit markets: – Producers can enter or exit the market

with no interference.

Characteristics of Perfect Competition

• 4. Independent Buyers and Sellers: – Buyers and sellers do not band

together to influence prices.

Characteristics of Perfect Competition

• 5. Well-informed buyers and sellers: – Both buyers and sellers know the

market prices and other conditions.

Imperfect Competition

• Monopoly– Types of monopoly

• Monopolistic competition

• Oligopoly

Characteristics of a Monopoly

• 1. Only One Seller:– A single business

controls the supply of a product that has no close substitutes.

Characteristics of a Monopoly

• 2. A Restricted, Regulated Market:– Govt. regulations or

other barriers to entry keep other firms out of the market.

• 3. Control of Prices:– Monopolies act as price

makers because they sell products that have no close substitutes and they face no competition.

Characteristics of a Monopoly

Types of Monopolies

• Natural monopoly:– Occurs when the costs of

production are lowest with only one producer.

– May occur because of economies of scale – the avg. cost of production falls as the producer grows larger

Types of Monopolies

• Government monopoly:– exists when the govt.

either owns and runs the business or authorizes only one producer.

Types of Monopolies

• Technological monopoly:– occurs when a firm

controls a manufacturing method, invention, or type of technology.

Types of Monopolies

• Geographic monopoly:– Exists when there are no

other producers within a certain region.

Characteristics of Monopolistic Competition

• 1. Many buyers and sellers: – Fewer sellers than perfect

comp., but still enough for meaningful competition.

Characteristics of Monopolistic Competition

• 2. Similar but differentiated products: – Use brand name and advertising to

differentiate from competitors

Big N’ Tasty Whopper Classic

Characteristics of Monopolistic Competition

• 3. Limited Control of Price: – Product

differentiation gives producers some control over what they charge.

Characteristics of Monopolistic Competition

• 4. Freedom to Enter or Exit Market: – Does not require huge amounts of

capital; can sell off equipment and other assets if doing poorly

An Example

• Five Guys Burgers with Fast Food Mania

•5 Questions for Five Guys from Forbes

Characteristics of Oligopoly

• 1. Few Sellers and Many Buyers: – A few firms dominate

the market– Exists if top 4 firms

control at least 40% of market

Characteristics of Oligopoly

• 2. Standardized or Differentiated Products: – Standardized: steel,

aluminum, glass– Diff.: cereals, soft

drinks

Characteristics of Oligopoly

• 3. More control of prices: – Because there are few

sellers, they have more control than in monopolistic comp.

– However, price changes will affect whole market.

– Less likely to compete based on price.

Characteristics of Oligopoly

• 4. Little Freedom to Enter or Exit Market: – Start-up costs are

extremely high for factories, warehouses, etc.

– Existing firms may also hold patents

# of Sellers

Type of Product Seller’s Control over Prices

Barriers to Enter or Exit Market

Perfect Competition

Many Standardized None Few

Monopolistic Competition

Many Similar, but differentiated

Limited Few

Oligopoly Few Standardized for industry, differentiated for consumers

Some Many

Monopoly One Standardized, but no close substitutes

Significant Very Many

A Review

• Market Structure with MJMFoodie