chapter 4 competition and market structure

trust

a combination of firms or corporations formed by a legal agreement, especially to reduce competition

price war

occurs when two or more firms compete primarily by lowering their prices

predatory pricing

selling a product below cost to drive competitors out of the market

market power

the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices

Deregulation

the removal of some government controls over a market

explain how pure competition and monopolistic competition are similar

In a monopolistic market, there is only one firm that dictates the price and supply levels of goods and services. A perfectly competitive market is composed of many firms, where no one firm has market control.

Why do monopolists practice price discrimination

In monopoly, there is a single seller of a product called monopolist. The monopolist has control over pricing, demand, and supply decisions, thus, sets prices in a way, so that maximum profit can be earned. ... This practice of charging different prices for identical product is called price discrimination.

Cartel

a group of firms acting in unison

monopolistic competition

a market structure in which many companies sell products that are similar but not identical

natural monopoly

a market that runs most efficiently when one large firm supplies all of the output

PRICE DESCRIMINATION

the practice of charging different prices to different buyers for goods of like grade and quality

license

A clear way to define the copyright of your creative work so people know how it can be used.

Monopoly

A market in which there are many buyers but only one seller.

Oligopoly

A market structure in which a few large firms dominate a market

what kind of rules and regulations does the government use to break up monopolies

Price capping - limiting price increases. Regulation of mergers. Breaking up monopolies

patent

evident or obvious

How can technology affect a monopoly

Sometimes the development of new technology can destroy a natural monopoly. A new innovation can cut fixed costs and make small companies as efficient as one large firm.

Franchise

The right to sell a good or service within an exclusive market

what power does a market leader in an oligopoly

They have to power to set prices and communicate with the other firms in the oligopoly.

Differentiation

actually differentiating the market offering to create superior customer value

price fixing

an agreement among firms to charge one price for the same good

non-price competition

competition based on factors other than price

antitrust laws

laws that encourage competition in the marketplace

government monopoly

monopoly created and/or owned by the government

Cullusion

secret agreement

what do firms stand to gain by increasing market power

they can control the price

merger

when two or more companies join to form a single firm

Name three barriers to entry in a market that can lead to the formation of an oligopoly

The three major barriers that can lead to oligopoly are: 1) Many small business owners want to put up small business with same products at the same market. 2) The prices are not competitive enough with regards to its product so the business owners can put its business in a not so competitive market and 3) The market itself has the same product that can lead to a competition if it has big competitors with the same products.

Give examples of price discrimination

Price discrimination occurs when identical goods or services are sold at different prices from the same provider. ... Examples of forms of price discrimination include coupons, age discounts, occupational discounts, retail incentives, gender based pricing, financial aid, and haggling.

List & explain three market practices that the government bans to protect competition

Regulates business practices. Breaks up monopolies. Blocks mergers

1997, the government accused Microsoft of predatory pricing. Does the rule against predatory pricing make sense in this case? Why or why not?

Yes it does because they were trying to run a small business out of service by lowering their prices and taking a loss to get rid of competition.

economics of scale

factors that cause a producer's average cost per unit to fall as output rises

How does price discrimination benefit producers and consumers

firms often offer a 10% reduction to students. Students typically have lower income so their demand is more elastic. This means they benefit from lower prices.