What characteristics define the structure of a market? Monopolistic Competition: Many Unique Products.Perfect competition and perfectly competitive markets exist in only a few businesses and industries

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Monopolistic Competition: Many Unique Products.Perfect competition and perfectly competitive markets exist in only a few businesses and industries. In fact, most businesses work very hard to make consumers believe that their products and services are special or unique. When many firms are selling similar products and services while explaining how they are "new and improved" or "used by professionals", or "the best value for the lowest price", the market is no longer perfectly competitive. Economists describe a market with many sellers providing similar but not identical products as monopolistic competition.

Sellers exert themselves to make their goods or services more attractive than the competitors’. Sellers sell almost the same products, but they are not the same in the minds of those who prefer one to the other. The effort to make a product more attractive than the competition’s distinguishes monopolistic competition from perfect competition. The process of creating uniqueness in products is known as product differentiation. Brand name, color package, location of the seller, customer service, credit conditions, or the smile of the salesperson can differentiate product, even if the products themselves are physically the same. Product differentiation benefits buyers by providing them with a way to distinguish between competing goods as well as sellers by enabling them to increase their market control.

So, monopolistic competition is characterized by:

ü a large number of firms producing similar but not identical products;

ü product differentiation;

ü some restrictions of information about market prices and quantities of goods;

ü a relatively easy entry to the market.

Oligopoly: A Few Sellers. Oligopoly is a term applied to markets dominated by a few (roughly three to five) large firms, each with substantial market control. Automobile and computer hardware are examples of industries dominated by oligopolies.

Oligopolies exist because it is difficult for competing firms to enter the market. The high cost of entry is one reason why some industries remain in the hands of a few sellers.

Another obstacle to trade is created by patent protections. Competing firms cannot enter some industries unless they pay the patent holders for permission to use the process or find a new method of production not protected by existing patents.

Price competition is less effective where there is oligopoly. Firms know that if they reduce their prices the competitors will do the same. In place of competition, oligopolies often look to price leadership, collusion, and c ustom to determine their pricing policies.

Monopoly: One Seller. A monopoly is defined as a single firm producing unique products for which there are no close substitutes. A monopolist has the market power or complete control over the market price. This enables that firm to charge a price that yields the greatest profit. A buyer who wants this particular product must either pay the monopolist’s price or do without it. Competing firms are unable to enter the market where a monopoly exists.

Imperfect Competition. Both perfect competition, with its many buyers and sellers, all of whom have perfect knowledge of market conditions, and perfect monopoly, with buyers, who unable to find substitutes and pay the monopolist’s price rarely occur/take place. In reality, most of the nation’s economic activity occurs under conditions of imperfect competition.This market structure consists of industries and markets that fall in between two extremes of perfect competition and pure monopoly. Professor Joan Robinson referred to this kind of trade as imperfect competition. Imperfect competition describes markets in which sellers have more freedom to determine prices than they have under perfect competition, but less than they have under monopoly.

Exercise 1. Read, translate into Ukrainian in written form and memorize the definitions of the following economic terms and concepts.

1. Collusion: A secret arrangement between two or more firms to fix prices or share the market.	____________________________________________________________________________________________________________________________________________
2. Competition: The rivalry between suppliers in the same market, usually in selling at the lowest price or in giving better quality or generally offering better value for money.	____________________________________________________________________________________________________________________________________________ _________________________________________________________________________________________________________
3. Competitive market: One in which there is only one price for a given commodity at any one time; all buyers and sellers know the condition of the market.	__________________________________________________________________________________________________________________________________________________________________________________________________________________ ___________________________________
4. Custom: The practice of establishing prices and market shares based on long-standing tradition.	____________________________________________________________________________________________________________________________________________
5. Imperfect competition: A market in which there is neither pure perfect competition nor pure monopoly.	____________________________________________________________________________________________________________________________________________
6. Market: Any mechanism that enables buyers and sellers to make bargains.	____________________________________________________________________________________________________________________________________________
7. Market structure: The types of competitive market within which firms operate.	____________________________________________________________________________________________________________________________________________
8. Monopolistic competition: A state of competition in a market in which many firms compete, producing similar but slightly differentiated products.	__________________________________________________________________________________________________________________________________________________________________________________________________________________
9. Monopoly: A market in which there is only one seller.	______________________________________________________________________
10. Oligopoly: A term applied to markets dominated by a few large firms.	____________________________________________________________________________________________________________________________________________
11. Patent: A special right over an invention or process for a given length of time.	____________________________________________________________________________________________________________________________________________
12. Perfect competition (Pure competition): A market for uniform products in which there many buyers and sellers, no one of which is big enough to affect the price, and has full knowledge of market conditions.	___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
13. Price leadership: The practice of one firm in the industry, usually the largest, setting a price which other firms follow.	_______________________________________________________________________________________________________________________________________________________________________________
14. Product differentiation: A process of creating uniqueness in a product.	____________________________________________________________________________________________________________________________________________

Exercise 2. Give the Ukrainian equivalents for the following.

1. for trading with one another
2. the power of the buyers and sellers
3. the barriers to entry
4. to make any difference between
5. the market for a particular commodity
6. the best value for the lowest price
7. to make a product more attractive
8. the process of creating uniqueness
9. some restrictions of information
10. the high cost of entry
11. to pay the patent holders for permission
12. increased sales
13. to determine their pricing policy
14. to do without something
15. to fall in between the extremes

Exercise 3. Find the English equivalents for the following words and phrases from the text.

1. рівні конкуренції
2. з точки зору
3. рід/сорт/характер/гатунок продукції
4. за умoвами досконалої конкуренції
5. мати справу з кимось
6. повністю знати, усвідомлювати щось
7. змусити споживачів повірити
8. надавати первагу чомусь на іншим
9. зі значним контролем / управлінням ринку
10. патентний захист
11. зменшувати надходження
12. розраховувати на лідерство в цінах
13. мати ринкову владу
14. мати повний контрольнад
15. економічна діяльність країни

Exercise 4. Match the verbs/verbal phrases, prepositions and nouns/noun phrases as they occur together in the text: translate the expressions they make into Ukrainian.

to accept		a product
to benefit		any difference
to distinguish	without	buyers
to do	for	competing goods
to enter		permission
to make	to	sale
to offer	between	the conditions
to pay		the market
to refer		the market price

Exercise 5. Match these nouns as they occur together in the text: translate the expressions they make into Ukrainian.

the pricing		a particular commodity
exit		entry
the nature		competition
the market	of	policies
product	for	entry and exit
а degree	to	competition
the barriers	from	the market
a cost		the product
price		the market
entry		differentiation

Exercise 6. Copy out from the texts the sentences containing the following words and word-combinations and translate these sentences into Ukrainian.

many competitive markets: ________________________________________________

____________________________________________________________________________________________________________________________________________

exactly the same commodity: ______________________________________________

to distinguish between competing goods: _____________________________________

______________________________________________________________________

____________________________________________________________________________________________________________________________________________

______________________________________________________________________

____________________________________________________________________________________________________________________________________________

find a new method of production: ____________________________________________

____________________________________________________________________________________________________________________________________________

______________________________________________________________________

____________________________________________________________________________________________________________________________________________

close substitutes: ________________________________________________________

____________________________________________________________________________________________________________________________________________

______________________________________________________________________

knowledge of market conditions: ___________________________________________

under perfect competition: _________________________________________________

____________________________________________________________________________________________________________________________________________

______________________________________________________________________

____________________________________________________________________________________________________________________________________________

Exercise 7. On the left of the page are the first halves of sentences. On the right are the second halves of the sentences, though not in the same order. Pair the halves and then write your own list of the completed sentences. Translate them into Ukrainian.

1. Consumers and producers exchange their goods and services	a. a single firm producing a product for which there are no close substitutes.
2. Oligopoly is a market in which there are	b. a large number of firms producing similar but not identical products and relatively easy entry for firms.
3. By the structure of the market economists mean	c. two or more firms jointly fix their prices, share the market and make other business decisions
4. The most important point about perfect competition is that	d. making potential consumers believe that their products and services are special or unique.
5. A monopoly may be defined as	e. the number and the power of the buyers and sellers.
6. Under the conditions of perfect competition prices are determined by	f. a small number of large firms that share market power.
7. In monopolistic competition many firms compete with one another for the same consumers by	g. a monopoly has the power to select any price that will yield the greatest profit.
8. Product differentiation benefits sellers by providing them a way of	h. the forces of supply and demand.
9. Monopolistic competition is characterized by	i. large number of independent buyers and sellers of exactly the same product.
10. Collusion denotes a situation in which	j. it is difficult for competing firms to enter the oligopoly.
11. As there are no other firms producing a similar product	k. enables a firm to create product loyalty.
12. The process of creating uniqueness in products known as product differentiation	l. in many competitive markets.
13. Because of the high cost of entry	m. no single firm controls the market.
14. Perfect competition is the name given to market structure characterized by	n. making their products more attractive than the competition.

__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Exercise 8. At least one word or word-combination has been omitted from each of these sentences. Rewrite the sentences filling in the blanks from the list of missing words below and translate them into Ukrainian.

1. Product differentiation provides a way for firms within certain industries _________

__________________________________. - __________________________________

____________________________________________________________________________________________________________________________________________

2. _____________________________________ is one of a number of ways to prevent new firms from entering the market called ________________. - __________________

____________________________________________________________________________________________________________________________________________

3. _______________________________________ is a market structure that consists of industries or markets that _____________________________ the extremes of perfect competition and monopoly. – ______________________________________________

____________________________________________________________________________________________________________________________________________

4. Since ___________________________ plays a key role in monopolistic competition, many firms spend money on advertising to make consumers distinguish between _________________________. – ___________________________________________

______________________________________________________________________

6. Sellers in __________________________________ have no influence over the price at which they can sell their products. - _______________________________________

____________________________________________________________________________________________________________________________________________

7. _________________________________ and quality competition result from product differentiation. - _________________________________________________________

______________________________________________________________________

8. There is no competition in ___________________. - _________________________

______________________________________________________________________

9. Economists describe a market with many sellers providing similar but not identical products as __________________________________. - _________________________

____________________________________________________________________________________________________________________________________________

10. Circumstances that make it difficult ___________________________ are described as "barriers to entry". - ____________________________________________________

______________________________________________________________________

to enter the market	competing goods	fall in between	oligopoly
the high cost of entry	monopoly	market structure	price competition
monopolistic competition	imperfect competition	product differentiation
a perfect competitive market	to increase their market control

Exercise 9. Match each term in column A with its definition in column B.

A	B
1. Collusion	a. The practice by a group of producers of fixing the price of their product at the price charged by one leading member of the group
2. Competition	b. A form of competition where sellers can influence buyers by differences in the quantity or appearance of the goods they produced
3. Competitive market	c. A situation in a market in which seller faces no competition
4. Custom	d. A secret agreement or cooperation for an illegal or deceitful purpose
5. Imperfect competition	e. A market in which a few sellers supply many buyers
6. Market	f. Distinction between products that fulfill the same purpose but are made by different producers and therefore compete with each other
7. Market structure	g. A form of competition in which the price of a good is the same throughout the market because buyers and sellers have perfect knowledge of market conditions
8. Monopolistic competition	h. The practice that has been used in a particular trade for a long time
9. Monopoly	i. One in which the price of a given commodity is at level which results in the sale of the whole quantity offered
10. Oligopoly	j. The institution through which buyers and sellers interact and engage in exchange
11. Patent	k. The rivalry among buyers and among sellers in the purchase and sale of resources and products.
12. Perfect competition (Pure competition)	l. A state of competition in a market in which buyers and sellers have imperfect knowledge of the market and more freedom to determine prices
13. Price leadership	m. A formal document giving an inventor the exclusive right to make, use, or sell an invention for a specified period
14. Product differentiation	n. The way in which a market is organized

Exercise 10. Translate the sentences into English using the active vocabulary.

1. Мікроекономіка займається тим, скільки покупців та продавців на ринку, продукція, що продається, є однаковою чи видозміненою, та чи можуть фірми легко з’явитися на ринку та залишити його.
2. Вид ринку конкуруючих продавців залежить від рівня конкуренції на цьому ринку.
3. Досконала конкуренція – це ринкова структура, за якої існує багато незалежних продавців однакової продукції, але жоден продавець не може впливати на ринок цієї продукції.
4. За умовами ринку досконалої конкуренції продукція, яка пропонується продавцями, однакова на думку покупців.
5. Сили пропозиції и попиту визначають ринкову ціну, з якою покупці і продавці або повинні погодитись, або залишити ринок.
6. Зa умовами монополістичної конкуренції, індивідуалізація продук-ції відноситься до намагань продавців змусити покупців думати, що ця схожа продукція унікальна.
7. Індивідуалізація продукції існує у межах галузі промисловості, коли кожний виробник продає товари, чиї характеристики відрізняють їх від продукції конкурентів.
8. Відносно легкий вступ до галузі вважається однією з важливих вимог монополістичної конкуренції.
9. Олігополія – ринкова структура, при якій фірми усвідомлюють взаємну залежність інвестицій, виробництва та продажів.
10. Олігополія характеризується невеликою кількістю відносно великих конкурентів, кожний з яких має значний контроль на ринку.
11. Фірма називається монополією, якщо вона є єдиним постачальним продукції, на яку немає замінників, але є багато покупців.
12. Монополіст захищений від конкуренції перешкодами до вступу.

Exercise 13. Discuss these statements or express your opinion on them. The following phrases may be helpful.

§ May I stress once again…,

§ I might as well add that…,

§ I see no point in saying…,

§ I'd like to draw your attention to the following…,

§ I cannot make up my mind as to…,

§ The thing I want to mention is…,

§ It would be only natural to stress that…,

§ I don't want to impose my ideas, but I am sure that…,

§ There is something (quite a lot) in what you say, but…,

§ It may seem so, but it runs counter to…

1. Under conditions of perfect competition market, all buyers and sellers are not aware of the prices and quantities at which transactions are taking place in the market.

2. In oligopolistic markets, product differentiation benefits both buyers and sellers.

3. In place of competition, monopolistic competition often looks to price leadership, collusion, and custom to determine their pricing policies.

4. The product sold by a monopoly has a lot of substitutes offered by other firms.

5. Imperfect competition relates to markets in which sellers have no freedom to determine prices.

Exercise 14. Answer the following questions.

1. What is a market?

2. What is a competitive market?

3. Where do consumers and producers exchange their goods and services?

4. What do economists mean by the market structure?

What characteristics define the structure of a market?

6. What are the principal types of market structures?

7. What is perfect competition?

8. What are the key characteristics of perfect competition?

9. Why can no individual alter the market price?

10. What does an identical commodity offered for sale mean?

11. How is perfect competition affected by such factors as the number of the buyers and sellers, product differentiation, and barriers to entry?

12. What is monopolistic competition?

13. What are the key characteristics of monopolistic competition?

14. What distinguishes monopolistic competition from perfect competition?

15. What is product differentiation?

16. Why does a firm try to differentiate its product?

17. How is monopolistic competition affected by such factors as the number of the buyers and sellers, product differentiation, and barriers to entry?

18. What is oligopoly?

19. Why does oligopoly exist?

20. What are the key characteristics of oligopoly?

21. Why is it difficult to enter the oligopolistic market?

22. What is patent?

23. Why is price competition less effective in the oligopolistic market?

24. What is meant by the term «price leadership»?

25. What is the purpose of collusion?

26. How is oligopoly affected by such factors as the number of the buyers and sellers, product differentiation, and barriers to entry?

27. How does oligopoly differ from monopolistic competition?

28. What is monopoly?

29. How does a monopoly determine its price?

30. How is monopoly affected by such factors as the number of the buyers and sellers, product differentiation, and barriers to entry?

31. What is imperfect competition?

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