BMGT 100 Lecture Notes - Lecture 11: Monopolistic Competition, Perfect Competition, Oligopoly

25. One difference between perfect competition and monopolistic competition is A) firms in a perfectly competitive market produce similar but slightly different products. B) in perfect competition, the product produced has no close substitutes. C) monopolistic competition has barriers to entry, whereas perfect competition has none. D) a small number of firms compete in a monopolistically competitive market and a large number of firms compete in a perfectly competitive market. E) firms in monopolistic competition have some degree of market power.

Question: The four kinds of free-market competition are perfect competition, monopolistic competition, oligopoly, and monopoly. The following list contains various examples of industries, products, and services. For each, decide on its degree of competition by indicating one of these: perfect competition (PC), monopolistic competition (MC), oligopoly (O), or monopoly (M). 

1. Wireless service provider
2. Printed newspaper
3. Streamed online or tv movies
4. Commercial banks
5. Makers of laundry detergent (Procter & Gamble and Unilever have most of the market share)
6. Tomatoes and corn
7. Airliner market (Boenig and Airbus)
8. Online schools
9. Viagra (Patent expiration is 2019)
10. Energy drinks
11. Pet apparel
12. Toothpaste
13. Grapes and apples
14. Beer industry (Anheuser-Busch and MillerCoors control about 80%)
15. Television industry
16. Automobile industry

This week we will explore the four different market structures that economists use to categorize firms. The first market structure of the week is known as perfect competition. What characteristics do firms in this category have? Give an example of a perfectly competitive firm and describe how market prices are determined under perfect competition.