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Video transcript

we've spoken a lot about monopolies monopolies monopolies and we've spoken a lot about perfect competition perfect competition and we kind of view them as polar opposites over here very you have exactly one player here you have many players and a monopoly you get to set the price in the quantity here you have to be a price taker in a monopoly there's huge barriers to entry in perfect competition there's no barriers to entry what I want to think about in this video is are there other situations or especially are there terms for other situations that are in between and to think about that I'm going to draw a spectrum I'm going to a two dimensional spectrum I could probably think of more variables where there's nuance between these terms but these are the two big ones so in one dimension I'm going to think about the number of competitors there are so this is the number of competitors competitors number of competitors and obviously a monopoly is one competitor perfect competition you've got a bunch you've got a bunch of competitors and so I'll put one right over here and a bunch of competitors if this was 0 then we there wouldn't even be a market to speak of no one is doing is participating there in this axis and the vertical axis in the vertical axis I want to think about how differentiated how differentiated the competitors in the market are how different are their products or their brands differentiation differentiation in the market and this was low differentiation and this is high this is high differentiation so let's think of a bunch of industries and think about where they sit here and then I'll introduce you to two new words other than just a monopoly or perfect competition so let's just say that we live in a world where there's there's 50 producers of screws and all of those screws are completely identical and so if one producers charge is even a penny more no one's going to want to go to them because they can get the exact same thing from one of the other of the many producers so that would be a case right over here low differentiation all the screws are the same and there's a bunch of competitors so that's about as perfect as perfect competition can get in the real world so bunch bunch of on of identical identical screw manufacturers I'm not sure if the actual screw market has a bunch of competitors but let's just assume if it did then you would be sitting right over here pretty pretty close in the world of perfect competition in the other spectrum you imagine your utilities in most places in especially the US but probably the world there's only one utility there's only one person one entity that's managing the powerlines a lot of times because of that it's actually run by the government but in most of the u.s. it's a revel it's a regulated private company and so here you have one player one player and you could debate whether it's low differentiation or so high differentiation that it's the only player but let's let's just stick it right over there low differentiation this right over here might be a utility utility and that's about as close to a monopoly or that actually is a monopoly they are the only player there mano mano comes from one Polly comes from seller 1 seller that would be a utility now there are things that are in between so for example if you thought about you're let's say that the telephone providers in your area they're normally are a few people who can provide phone service especially with the age of Internet telephony now the cable companies are starting to provide phone service and the telephone companies are starting to provide internet and cable service so we could think of that market so let's put this market right over here so the number of competitors is low so it's going to be here and they are somewhat differentiated they might give you a different cable box or might offer you slightly different levels of bandwidth or whatever else so there's somewhat differentiated right over here so I'll call that the cable cable internet internet telephone providers telephone telephone providers right over there then you could think of markets you can think of markets where there's a bunch of competitors there's a bunch of competitors but they are somewhat differentiated and I can think of fine dining so let's say so here there's a bunch of restaurants in any place that sells you know nice food that they really define themselves by the quality of the food that they produce so they're highly differentiated each restaurant is you the chefs have specialties and all the rest but there its but there's a bunch of them so right over here I will put fine fine fine dining you could also imagine you know name-brand clothing there they're very differentiated certain design or certain materials all of those type of things but there's a bunch of them so name brand name brand clothing name brand clothing it's not quite perfect competition it's very competitive there's a bunch of players there but they don't they're not selling the same product they are very very differentiated to some degree you almost feel like even though there's all this competition they have a monopoly on their own product another one could be you could imagine something like you know high end laptops or high end computers or or you know nice computers or I may be able to say computers in general computers in general computers in general some people might want to go for an apple that's what they've associated with and some people might want to go for a Sony so maybe I'll put branded computers up here so branded branded computers computers up here but then you can also have something like the unbranded PC market and that might be something closer to here where you might have these random manufacturers you don't even care some manufacturer from overseas you don't even care but they're saying they're using the they're using the same processor the same memory chip they're saying using all the same things so they're much less differentiated so this might be right over here unbranded unbranded and that tends to happen with the personal computer industry that you're like well they're using the same Intel chip they're using the same memory they're they're all running Windows whatever else there's not a lot difference between them so those actually start getting closer to this perfect competition so the whole reason that I've introduced you these ideas to you is that there are names there are names for these things that aren't quite perfect competition because they're highly differentiated and there are names for these things that aren't quite monopolies because they have a few providers these right over here so you know we could put other things around here so I'll circle this general area we would call these oligopolies alley aghh appellees oligopolies and Ali this comes from this part right over here and I'm not an expert in Greek but this comes from whew and obviously the poly once again just what monopolies comes from sellers comes from sellers so this means few sellers and oligopolies and we're going to study this in much more detail they're not quite monopolies they can't set the price in the quantity and they can kind of depending on the oligopoly on the market they might start acting more like a monopoly the players could coordinate with each other so that to their mutual benefit or they might become fiercely competitive even if there's only a few providers so oligopolies can kind of can kind of in their personality characteristics they can either look more like monopolies or they can look like kind of very competitive industries and these things up here where these are quite competitive industries these are quite competitive industries but they are highly differentiated to some degree you could say that for example in branded computers Apple has a monopoly on selling Apple computers it doesn't have a monopoly on computers obviously there's many many people who can provide computers but they have a brand if someone wants an Apple computer you have to go to Apple it's almost you know it's a it's a self-evident statement but they but there's highly differentiated highly branded and so they have a monopoly on their product but there are many many many other competitors who are out there that won't let them just set price because they can offer products that are that serve the same purpose but they're differentiated in some way and so these these players up over here we would call these or these markets these are monopolistic monopolistic competition competition and when you first hear that it sounds it sounds more because the word the first word you hear is monopolistic but this is more this is at least in my mind closer to perfect competition than it is to a monopoly because this is a or at least the way I view it in my mind monopoly is completely completely uncompetitive well this is still highly competitive it's still not quite as highly competitive as perfect competition but it's close you have a monopoly in just your product but there are other not too different similar pros they're their other products on the market that whose prices affect your price or that there are other alternatives I should say in the market that that that will affect people's demand for your product and the best giveaway between monopolistic competitor and a perfect competition is that there is some differentiation with the products over here there is some maybe branding here there's maybe some quality difference between the products
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