chapter 7: market structures
antitrust legislation
defines monopolies and gives government the power to control them
federal trade commission (FTC)
enforces antitrust laws and monitors unfair business practices, including deceptive advertising
government monopoly
exists when the government either owns and runs the business or authorizes only one producer
geographic monopoly
exists when there are no other producers within a certain region
patent
gives an inventor the exclusive property rights to that invention or process for a certain number of years
economies of scale
occur when the average cost of production falls as the producer grows larger
imperfect competition
occurs in markers that have few sellers or products that are not standardized
technological monopoly
occurs when a firm controls a manufacturing method, invention, or type of technology
price fixing
occurs when businesses agree to set prices for competing products
predatory pricing
occurs when businesses set prices below cost for a time to drive competitors out of the market
market allocation
occurs when competing businesses divide a market amongst themselves
monopolistic competition
occurs when many sellers offer similar, but not standardized, products; one of the most common market structures
nonprice competition
occurs when producers use factors other than low price to try to convince consumers to buy their products
natural monopoly
occurs when the costs of production are lowest with only one producer
monopoly
occurs when there is only one seller of a product that has no close substitutes
geographic
professional sports are an example of this type of monopoly
food and drug administration (FDA)
protects consumers from unsafe foods, drugs, or cosmetics; requires truth in labeling of these products
environmental protection agency (EPA)
protects human health by enforcing environmental laws regarding pollution and hazardous materials
natural
public utilities, like a water company, are an example of this type of monopoly
deregulation
reduces or removes government control of business
OPEC (organization of the petroleum exporting countries)
regulates the amount of oil that flows through its pipelines, exerting control over the market price for oil
federal communications commission (FCC)
regulates the communications industry, including radio, television, cable, and telephone services
securities and exchange commission (SEC)
regulates the market for stocks and bonds to protect investors
cease and desist order
requires a firm to stop an unfair business practice
consumer product safety commission (CPSC)
sets safety standards for thousands of types of consumer products; issues recalls for unsafe products
barrier to entry
something that hinders a business from entering the market
product differentiation
the effort to distinguish a product from similar products
start-up costs
the expenses that a new business faces when it enters the market
perfect competition
the ideal model of a market economy
merger
the joining of two firms to form a single firm
government
the postal service is an example of this type of monopoly
technological
this type of monopoly can occur when an inventor obtains a patent
regulation
a set of rules or laws designed to control business behavior
only one seller, a restricted, regulated market, control of prices
3 characteristics of a monopoly
few sellers and many buyers, standardized or differentiated products, more control of prices, little freedom to enter or exit the market
4 characteristics of an oligopoly
many sellers and buyers, similar but differentiated products, limited control of prices, freedom to enter or exit market
4 characteristics of monopolistic competition
public disclosure
a policy that requires businesses to reveal product information
standardized product
a product that consumers consider identical in all essential features to other products in the same market, regardless of producer
price taker
a business that accepts the market price determined by supply and demand
market share
a company's percent of total sales in a market
price maker
a firm that does not have to consider competitors when setting the prices of its products
trust
a group of firms combined in order to reduce competition in an industry
cartel
a group that acts together to set prices and limit output
oligopoly
a market structure in which only a few sellers offer a similar product; less competitive than monopolistic competition
focus group
a moderated discussion with small groups of consumers
market structure
an economic model of competition among businesses in the same industry
monopolistic
an example of this type of competition is the market for t-shirts with printed images or slogans
