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