Lesson: Market Competition

Instructor: Nick Palazzolo

In this lesson, Knick Palazzolo, CPA, demystifies the complex terrain of market competition by breaking it down into four digestible types: perfect competition, monopolistic competition, monopoly, and oligopoly. With relatable and everyday examples, he conveys the unique characteristics of each market structure, from the freedom and homogeneity of goods in perfect competition to the high barriers to entry and economies of scale in a monopolistic environment. Nick's engaging discussion also highlights what it means for firms to operate in these different markets and provides insights into why some might choose to compete in one market type over another, inviting a deeper understanding of strategic business decisions in the competitive landscape.

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Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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All right, we've got some market competition for you. This could be a little tricky. And I remember this from all the way back in college and studying for the exam. And now I'm here to teach you, for example, monopolistic competition, which is different than monopoly, even though it's got this in its name. That's the fun fact to start this off with four types of competition to talk about, and I've got examples of each.

Now let's start with perfect competition. This is normal, right? Hundreds of companies. So think of a farmers market, everyone's going to the market exchanging goods. We've got a bunch of companies, a bunch of suppliers, a bunch of producers.

Foreign exchange markets got a lot of just hundreds and hundreds. Normal profit, freedom to enter and exit the market. Homogeneous goods, homogeneous meaning all the same. So they're selling apples. Everyone's apples are the same, presumably everyone's oranges are the same.

Monopolistic competition, this is more normal of what we would see. So restaurants, grocery stores, there's not unlimited and we're thinking, okay, yes, in the grand scheme of things, I guess there are unlimited restaurants. But think of in a market. So a market meaning like a town or a city. So there are a limited number of restaurants, relatively in a city.

Grocery stores, there's a limited number of grocery stores less profit than in a monopoly, which we will see low barriers to entry. So it's pretty easy to start relatively compared to what we'll see with these low barriers to entry to start a restaurant. Grocery store firms all produce differentiated products. So yeah, that's just a little bit more constrictive than a perfect competition situation, but still a pretty good situation to have. Now, monopoly, one firm with at least a

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