AGEC1003 Chapter 3

Sherman Act

Act in which every contract, combination in the form of trust or otherwise, or conspiracy, in the restraint of trade or commerce among the several states, or with foreign nations, is declared to be illegal

Performance

firm level: -competitive disadvantage, competitive parity, temporary or sustained competitive advantage society level: -productive and allocative efficiency, level of employment, progress

Capper-Volstead Act of 1922

gave farmers protection from anti-trust law and allowed them to cooperatively market

Mergers

gov't usually prevents any mergers and acquisitions by companies that would make up more than 50% of the market

Marketing orders

government directives imposed on the processors of perishable commodities that require the processor to behave in the best interest of the producer rather than the self-interest of the processor

Ownership Satisfaction

inability to transfer ownership (1 of the barriers to consumer satisfaction)

Information Separation

lack of relevant information about the product

Space Separation

location of product is not accessible (1 of the barriers to consumer satisfaction) (ex. - pizza won't deliver to rural areas)

Perfect Competition

marginal cost curve defines the firm's supply curve

Concentration Ratios

measure the percentage of industry sales accounted for by the "X" largest firms

Financing Function

overcomes form, time, and space seperation barriers by providing funds to pay for production, storage and transportation before payment from sale

Storage

overcomes space separation

Processing Function

overcomes value or form barrier to consumer satisfaction by transforming products to forms that have greater value to consumers (ex. - smaller packs)

Quantities

producers accomplish their happiness by producing large ____ of just a few things

Production process

producers buy large amounts of just a few things that consumers want and then allow consumers to buy small quantities of a large assortment of items

Time Separation

product not available when it's desired (1 of the barriers to consumer satisfaction)

Antitrust laws

prohibitions against price fixing and other anticompetitive practices that threaten competition

Marketing

resolves the conflicting needs of producers and consumers

Conduct

strategies firms pursue to gain competitive advantage

Performance

structure and conduct affect economic ____, consequently if the markets meet the aforementioned criteria for structure and conduct the market should perform fair and efficient manner

Federal Trade Comission

the _____ ______ ______ and the U.S. Department of Justice use the Structure-Conduct-Performance model to monitor the efficiency and fairness of our economic system

Franchise

the government can ______ or concession to a firm and allow it to operate as a monopolist

Monopolies

the government can grant trade associations the power to create ______ in their products

Structure-Conduct-Performance Model

the way forms are organized in a market (structure) tells a great deal about how they make decisions (conduct) which in turn influences the level of efficiency and fairness present in a market (performance)

Risk-bearing function

used to overcome time separation barrier by assuming the risk of loss before consumption

Place Utility

utility created by the transportation function to make the product available to consumers where they need it

Time Utility

utility that can be created by storage activities to satisfy year round wants and desires

natural monopolies

examples of this are slemco and cleco

Food products act of 1917

food grading by USDA's AMS division

Marketing

set of economic and behavioral activities that are involved in coordinating the various stages of economic activity from production to consumption

Marketing Information Function

used to overcome information separation barrier by disseminating market

Four Utilities of Marketing

1. Form Utility 2. Place Utility 3. Time Utility 4. Possession Utility

Five Barriers to Consumer Satisfaction

1. Ownership Separation 2. Time Separation 3. Space Separation 4. Value Separation 5. Information Separation - Overcoming these barriers makes consumers happy -the function of a marketing system is to overcome these barriers

Nine Marketing Functions

9 functions that are used to overcome the five barriers to consumer satisfaction

Meat Inspection Act (1906)

Made it so that meat would be inspected by the government from coral to can. It began a quality rating system as well as increased the sanitation requirements for meat producers.

Grades and Standards Function

Overcomes information separation by providing a classification system that requires adherence to specific descriptions of commodities and products.

Transportation

overcomes space barrier to consumer satisfaction by moving products from production centers to where the consumer is willing to purchase it

Profits

producers maximize their happiness when they maximize their long run ____

Value Separation

product is not in the proper form (1 of the barriers to consumer satisfaction)

Five Key Questions Marketing Answers

- What products to produce - How much to produce - When production should be initiated - Who should do the producing - For whom goods should be produced

Prerequisites to Efficient Economic System

-free market economy -prices reflect full value of resources -High degree of interaction between Consumers and Producers

Structure

-number of competing firms -homogeneity of products -cost of entry and exit -few barriers to market entry and exit -firms differentiate

Perfect Competition

-the product is homogenous (consumers does not distinguish between products of different producers) -no artificial limitations to entry to or exit from the market

Monopoly

-there is one and only one seller of a given product in a given market -the firm and the market are one and the same

Clayton Act

Prohibited Acts that lessened competition and tried to create monopolies

fair trade in these markets

The Packers and Stockyards Act of 1921 and The Perishable Commodities Act of 1930 allowed for _____

Mission of Marketing

To bridge the gap between the conflicting needs of producers and consumers by completing the production process for consumers

Marketers

_____ buy large quantities of goods from manufacturers and transform them into a form that consumers desire

Needs

a firm's success does not come from producing a technically superior product, but from satisfying consumers' needs

Conduct

behavior of the profit maximizing firm manager

Possession Utility

created by the exchange function to allow a customer to take ownership of a product

Form Utility

created by the processing function to make a form more desirable for customers