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Imperfect Competition and Monopoly - Coggle Diagram
Imperfect Competition and Monopoly
Imperfect competition
Whenever a market, violates the abstract tenets of perfect competition
Varieties
Monopoly
A single seller with control of all an entire industry
Oligopoly
Few sellers, mostly 2 to 10 or 15
Monopolistic competition
Seller produce differentiated products
Examples in Mexico
Nestlé, PepsiCo, Cemex, Televisa
Sources of market imperfection
Causes
To have fewer sellers when there are significant economies of large-scale
They go toward imperfect competition when there are "barriers to entry"
Marginal revenue
The change in revenue that is generated by an additional unit of sales.
Can be either positive or negative
Marginal Principle
People will maximize their incomes by counting only the marginal costs and marginal benefits of a decision
Barriers to entry
Factors that make it hard for new firms to enter
Economies of scale
Cost advantages reaped by companies when production becomes efficient
Legal restrictions
Governments can restrict competition in certain industries
High cost of entry
The investments are also high for any potential new entrant
Advertising and product differentiations
Advertising
Creates product awareness and loyalty to well-known brands
Differentiation
When a small number of manufacturers produce a vast array of different products, brands, and models