Imperfect Competition

Lyrics

Verse I
Markets aren’t perfect, that’s just a myth
Y’know perfect competition just doesn’t exist
There’s all different types of price-setting behavior
And recognizing these might help to save ya

Buyers might be alone: that’s a monopsony
Or input firms, they might have a monopoly
Or get together in a union or association
Bring collective bargaining power to the negotiation

When a market has imperfections
You’ll generally find a negative effect on
The quantity of an input used
“But what about the price?” Don’t get it confused:

It could be higher, or lower, or even the same
It all depends on how the players are playing the game
Between the buyers and suppliers all trying to make their profit higher
Market power comes when you can set the price

Chorus
Imperfect competition
These are a few conditions
So settle back and listen
To this musician spittin’ economic definitions for tuition

Verse II
A monopsony is where there’s only one buyer
Or for labor, if there’s only one company that will hire
Like if you wanna play basketball and get paid
Good luck finding a job outside the NBA.

Degrees of monopsony will turn up
When you describe your supply with a function that curves up
That means the price per unit increases with the quantity
The Marginal Factor Cost, it has gotta be

Greater than the price... So how do you decide (on)
A quantity to get your profit maximized?
You just buy at the quantity where your MFC
Equals marginal revenue produced--the MRP.

Find that quantity on the curve showing supply
Then you look to the left and find your price on the Y
That’s how much you pay for the factor
Now let’s move on to the rest of the chapter

Chorus

Verse III
The buyer’s not the only one who can set a price
Sometimes that market power is on the other side
When a supplier firm has monopoly control
It can set the price at which its goods are sold

And sometimes individuals will unite
Join forces to gain more power--
Put up a fight for better wages, closer to their MRP
Which can be tough up against a monopsony

They can improve their skills through training programs
Or fight the substitutes to increase demand
They can also try to let the labor supply dip:
Push early retirement or limit union membership

“But what happens when you’ve got one buyer,
But on the other hand, only one supplier?”
That’s a bilateral monopoly
Wages can’t be predicted, gotta wait and see...

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Description

This rap song teaches about imperfect competition in economics. "Imperfect Competition" describes key terms such as perfect competition, price-setting behavior, monopoly, monopsony, labor market, and market power. Verse 2 describes monopsonies, marginal factor cost (MFC), and marginal revenue produced (MRP) in more detail. Verse 3 describes monopoly power in more detail, using unions as an example.

This economics song is suitable for explaining imperfect competition to high school, college, and graduate school students.

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Related Reading and Activities

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State Standards

State standards listed here are representative of school standards across the United States.

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