Section 3: Monopolistic Competition and Oligopoly
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Transcript Section 3: Monopolistic Competition and Oligopoly
Describe what is happening
Take out Spiral
What will we learn today?
12.2.7 Analyze how domestic and international competition in a market economy
affect goods and services produced and the quality, quantity, and price of those
products.
Unit: Market Structures
Think about the last
purchases you made,
what contributed for
you deciding to buy that
item? Is there truth to
advertisement?
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Assignment 12:
7.3 Monopolistic Competition
and Oligopoly Notes
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Section 3: Monopolistic
Competition and Oligopoly
So far we learned about two extremes:
perfect competition and monopoly.
Very few things actually fall into those
categories. Instead, most fall into two
additional categories economists call
monopolistic competition and
oligopoly.
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I. Monopolistic Competition
In monopolistic competition, many companies
compete in a open market to sell products that are
similar but not identical.
Examples: jeans, bread (loaf), shoes, drinks, etc.
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A. Four Conditions of
Monopolistic Competition
1. Many firms: many companies selling products
2. Few barriers to entry: anyone can sell
products without much trouble getting started
3. Slight control over price: consumers are
willing to pay more for some brands, but not too
much more.
4. Differentiated products: even though
products are similar, they have differences (Zune
vs. iPod)
(differentiation: making a product different
from other similar products)
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B. Nonprice Competition
Firms try to compete with nonprice
competition, or attracting customers
through style, service, or location, but not a
lower price.
Some examples:
1. Physical Characteristics: size, color,
shape, texture, taste
Example: A pen is a stick with ink that
writes, but we pay more for style or how it
writes.
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2. Location: Location is very important to a
business's success.
3. Service level: restaurants: expensive, fast
food: cheap. Both offer food.
4. Advertising, image, or status: Customers
are willing to pay more for brand name
clothes with logos
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Section 3 - Oligopoly
$ An oligopoly is a market
dominated by two or four firms
producing 70%-80% of the output.
Example: Pepsi, Coke
A. Barriers to Entry
It can be tough to go up against
these companies. Who would
want to create a new soft drink to
challenge Pepsi or Coke?
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B. Cooperation and Collusion
Price war: a series of competitive price cuts that lower
the market price below the cost of production
example: PS3 lowers price, so does Xbox and Nintendo
Collusion: when businesses get together and set
prices, divide the market, or limit production (illegal)
Price fixing: an agreement among firms to charge one
price for the same good (illegal)
Cartel: a formal organization of producers that agree
to coordinate prices and production (illegal in the US)
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It’s a Mad Mad Mad World
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Assignment :
pg. 171, 1 – 7 (skip #6)
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Assignment :
Advertising Brainwashing
Write down as many advertising slogans as you can
think of.
Person who can write the most gets extra credit.
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ADVERTISING: What is it?
Like A Rock
ADVERTISING
Like A Rock
ADVERTISING
Maybe She’s Born With It
ADVERTISING
Maybe She’s Born With It
ADVERTISING
I’m Loving it!
ADVERTISING
I’m Loving it!
ADVERTISING
Just Do It!
ADVERTISING
Just Do It!
ADVERTISING
Can You Hear Me Now? Good!
ADVERTISING
Can You Hear Me Now? Good!
ADVERTISING
Ch Ch Ch Charming!
ADVERTISING
Ch Ch Ch Charming!
ADVERTISING
If It Doesn’t Get All Over the Place, It Doesn’t Belong
In Your Face
ADVERTISING
If It Doesn’t Get All Over the Place, It Doesn’t Belong
In Your Face
ADVERTISING
Have It Your Way!
ADVERTISING
Have It Your Way!
ADVERTISING
Eat Fresh
ADVERTISING
Eat Fresh
ADVERTISING
Is It in You?
ADVERTISING
Is It in You?
ADVERTISING
Think Outside the Bun
ADVERTISING
Think Outside the Bun
ADVERTISING
Built _____ Tough
ADVERTISING
Built Ford Tough
The Power of Ads
This project is worth 50 points,
so be sure to do a good job.
YOUR TURN! You will get into groups of 2-3 (pick people you
are comfortable working with, possibly after school)
In groups, you will choose a product to sell. You will apply
non price competition to encourage people to buy your
product.
For this product you must create:
1. A slogan- short catchy saying
2. A advertisement- (hand drawn or computer generated)
poster with slogan and picture that includes advertising
technique, message and target audience.
3. A commercial- short skit that includes advertising
technique, message and target audience.
- All group members must participate in commercial.
- You must use props and scripts.
- Commercial will be performed in front of class. (You can record on your
own, but must be in a format that can be shown to class.)
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ADVERTISMENT Project
Advertisement/Poster – 15 points
Leave little to no white space
Should be very visually appealing (think like a magazine
advertisement)
Use your slogan!
Commercial/Skit – 25 points
Everyone participates (camera man can sit it out)
Can be anywhere from 45 seconds to 2:00 long
Use props. Dress up. Be professional. Use a script. Don’t
improvise.
Slogan – 10 points
Short, catchy.
Is Wal-Mart Good for America?
Discuss
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Is Wal-Mart Good For America?
Before we watch:
Outsourcing is when a business obtains services or products used in
manufacturing, such as parts for a television set, from an outside (often
overseas) supplier or manufacturer in order to cut costs.
Offshore Companies conduct most of their business outside of the country in
which they are incorporated. These companies are also known as non-resident
companies.
Push Production is when manufacturers of products decide what to produce,
how much to produce and the price of the product.
Pull Production is when retailers determine what the manufacturer will
produce, how much to produce and the price of the product.
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What did you notice at the Wal-Mart shareholders meeting? Do you think this is different from other shareholders'
meetings? If yes, in what ways?
How is Wal-Mart able to keep track of its inventory? Why is this important? List the effects this has on producers.
Trace the decline of Rubbermaid from 1994 to 2004. What factors most contributed to this decline?
What is an opening price point? How does it influence sales?
Wal-Mart started a campaign encouraging people to buy products that were made in America. What influence did this
have on Wal-Mart's buying practices? Be specific!
In 1994, President Clinton said that new trade agreements would create a market for American products in China.
What happened to the United States companies after opening trade with China? Include statistics, companies and
places.
List the arguments in favor of outsourcing and those that are against it.
Compare the situation at Five Rivers Electronics and the Thomson Plant. What caused problems and what was the
result for each?
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