1. Role of Producers & Consumers in a Market Economy EPF2i. Monopolies and Collusion

2. Monopolies & Collusion Monopolies and collusion among sellers eliminate competition In industries with less competition, prices are likely to be higher 2

3. Essential question: What is an industry? 3

4. An industry is: A distinct group of productive or profit-making enterprises sharing similar products or services Ex. the automobile industry 4

5. Essential question: What are the characteristics of competitive and uncompetitive markets? 5

6. Competition in Industries: The level of competition in an industry is affected by : the ease with which new producers can enter the industry And by the availability, price and quantity of substitute goods and services 6

7. Essential question: What collusion? 7

8. Collusion: Is when competing firms make a secret agreement to try to control a market Collusion (practiced by cartels) is illegal in the United States It reduces the level of competition in a market Is more difficult in markets with large numbers of buyers and sellers. 8

9. Essential question: How are prices affected when markets are more competitive? Less competitive? 9

10. Markets with Perfect Competition Have many buyers with perfect information and sellers all selling identical products Sellers here have no market power – no control over the market price For example, a grower of plain white rice can only sell at the market price – no one will pay more because they can get plain white rice from any supplier at that price 10

11. Less Competitive Markets:Monopolies & Oligopolies A monopoly – has one supplier of a product. The seller here has market power and can control both price and quantity. An oligopoly – when there are few sellers, competition is limited, and producers are able to gain more control of the market A natural monopoly - when 1 producer can supply total output in a market at a cost that is lower than when 2 or more producers divide product, competition may be impossible. In the absence of competition, govt regulations may then be used to try to control price, output and quality. 11