2. Full Sheet
Bellringer
1. Describe a time you paid
more money for a good or
service you thought was
better quality.
2. Describe a time when you
bought a good or service
that was cheaper than other
brands.
3. Describe a time when you
competed against someone
else.

3. Competition experiment
• 3 groups
• 1 volunteer
• Group of 4, can talk
• Everyone else, can’t talk
• Think about price & quality
I will buy one
for up to $1
Widget:
WPrice: $
Your name:

4. Pricing power
• Some firms can choose their own price
• Price makers
• Some firms must take the prices the market gives
them
• Price takers

5. On your BR
4. How much pricing power did you have during the
simulation? Explain why.
5. Why do consumers benefit from competition?
Use three specific business examples in your
answer
6. Why do producers suffer from competition?
7. Why does pricing power depend on the number
of firms in the market?

6. I Love Lucy clip

7. Bellringer
1. How many players win the
game “Monopoly” if you
play it until the end?
No we won’t be playing it in
this class.
2. How many suppliers sell
lunch here at Flowing
Wells?
3. How would things change
if FW allowed multiple
sellers during lunch?

8. 4 Market Structures
• Monopoly
• Monopolistic Competition
• Perfect Competition
• Oligopoly

9. Monopoly
• A market for a
good/service with one
dominate seller
• Firm has total “pricing
power”
• Has extremely high entry
costs, OR impossible

10. Types of surplus
• Consumer surplus: difference between budget and
actual price
• Producer surplus: difference between cost and
price (really just profit)
Budget:
$50
Actual:
$40

12. Draw less supply on board
• What happens to CS?

13. Price Discrimination
Think/Pair/Share
Examples?
Senior
discount
Student
discount
Ebay

14. • Santa Barbara, CA

15. • Argentina

16. Types of Monopoly
• Geographic
• Only firm in a
certain area
• Fences
• Small towns
• Other
example?
• Draw PEST
change on
board

17. Types of Monopoly
• Government
• Granted by the
government
• “public utilities”
• Reasoning?

18. Types of Monopoly
• Technological
• Due to
technology
• (Patents)
• (Copyrights)
• Software,
biotechnology,
artistic
• Reasoning?
• examples

19. On your BR
Name the type of monopoly & why
4. Fernanda designs a new game app
5. Popcorn at Harkins movie theater
6. Interstate Highways like I-10 or I-19
7. The only mechanic Ajo, Arizona
8. School lunches at Pueblo
9. Snacks in certain Pueblo classrooms
10.Secret recipe for Gatorade
11.US military
12.Tucson Water Company
13.Expensive soda at a baseball game

20. Closure questions
4. Why do economists worry about
monopolies? (hint: think about prices)
5. Why are technological monopolies allowed
to exist? (think about creative businesses)
6. Do you think government monopolies are
always positive for consumers? (consider
our school lunches, or the AZ MVD)

21. For the other 3 Market Structures
• Monopoly
• Monopolistic
Competition -
Juniors
• Perfect
Competition
Sophomores
• Oligopoly -
Seniors
• Split into two groups
• 1 group
makes/writes lesson
• 1 group writes
simulation, game or
5 min skit (everyone
talks)
• 10/10 if everyone
participates and its
easy to understand

22. Bellringer
1. Do an OPTIC
on this
cartoon:
O – Cartoon,
newspaper
2012
P – ????
T – no title
I – sizes b/w
parts
C - ?????

23. Perfect Competition Market
• Features:
• Many firms
• Nearly identical products
• No pricing power
• Same Price!
• Easy to start new firm
• Easy to close down firm
• Perfectly informed
consumers
• Costs really important
Other Examples?

24. Monopolistic Competition Market
• Features:
• Many firms
• Different or perceived different
products
• Some pricing power
“price makers”
• Different prices
• Can be easy to start new firm
• Can be easy to close down
firm
• Not fully informed consumers
Other Examples?

25. Oligopoly Market
• Features:
• Few very large firms
• Very similar products
• Some pricing power
“price makers”
• Difficult to enter market
• Difficult to close down
company
• Not fully informed consumers
Other Examples?

26. Perfect vs. Monopolistic
Competition
• How could you contrast the two markets?

27. Oligopoly & Monopoly
• How could you contrast the two markets?

28. Draw a 4 part diagram of the market
structures

29. Perfect
Competition
Monopolistic
Competition
Oligopoly Monopoly

30. What type of market?
• Mexican Food

31. What type of market?

32. What type of market?
• Blank DVD’s

33. What type of market?

34. What type of market?

35. What type of market?

36. What type of market?
• Movie theaters in Tucson

37. What type of market?
• Hair cut

38. What type of market?
• Broadcast TV

39. What type of market?
• Electric Power

40. What type of market?
• Hotels

41. What type of market?
• Notebook paper

42. Costs
• Put the following businesses in order by how
expensive they would be to start up starting with
the cheapest:
• NFL team
• Landscaping
• Restaurant
• Television station
• Company that writes phone apps
• Lemonade stand
• T-shirt (silkscreen) printer

43. • Costs!

44. THE COSTS OF PRODUCTION 44
Total Revenue, Total Cost, Profit
• We assume that the firm’s goal is to maximize
profit.
Profit = Total revenue – Total cost
the amount a
firm receives
from the sale
of its output
the market
value of the
inputs a firm
uses in
production

45. An unsuccessful business
• Costs that they can change tomorrow
• Costs that they can’t change

46. Let’s think more specifically about costs
• Fixed Costs = costs that do not change based on
production and don’t change in SR
• Examples: capital goods, tools, buildings, menus
Nokia factory in Finland
Coke factory in Atlanta, Georgia

47. Special fixed costs
• “Entry costs” – costs to start up the business
Business with low
Entry costs
Business with
very high
Entry costs

48. Costs we can change in the short run
Variable costs = costs that
change based on
production
The more I produce, the
more cost I will incur.
If I don’t produce at all, my
variable costs will be 0
For example: labor,
electricity, raw materials
Nike factory in China

49. Michael Jordan visiting Nike Factory in 1999 Why produce in China?

50. Marginal Costs
• Marginal costs = the
cost of producing 1
additional unit
• For example:
• Why helpful?
• Diminishing
marginal product!
Widgets
0
1
2
3
4
FC
1
1
1
1
1
VC
0
6
11
16
22
MC
X

51. Total Costs
• Total Costs = fixed + variable costs
For example:
Widgets
0
1
2
3
4
FC
1
1
1
1
1
VC
0
1
2
3
5
TC
1
2
3
4
6
MC
X
1
1
1
2
Revenue
0
2
4
6
8
Assume Widgets
price
$2/each
Profit
-1
0
1
2
2

52. BR Quiz
1. Write 3 examples of FC for this firm
2. Write 3 examples of VC for this firm
3. How could this firm increase its TR?
4. Give an example of diminishing marginal returns
for this firm