Econ Chapter 7

Price Takers

A producer that has no influence over the price of a product; price takers must accept the market price.

Commodity

A product that is exactly the same no matter who produces it.

Legal Monopolies

These legal monopolies fall into three broad categories: resource monopolies, government-created monopolies(Patents and copy rights, Public Franchises, Licenses), and natural monopolies.

Trust

a combination of firms; in the late 1800s, trusts worked to eliminate competition and control prices, but were later banned under antitrust laws

natural monopoly

a market controlled by a single firm for reasons of efficiency; in a natural monopoly, one firm can provide a good or service at a lower cost than two or more competing firms.

monopolistic competition

a market structure in which many producers supply similar but varied products

collusion

an arrangement in which producers cooperate on production levels and pricing; collusion is illegal in the United States

cartel

an organization of producers established to set production levels and prices for a product; cartels are illegal in the United States but do operate in global markets

imperfect competition

any market structure in which producers have some control over the price of their products; in such a market, prices are no longer set by supply and demand

Anti Trust Laws

legislation designed to limit the formation of monopolies or combinations of firms that act to restrict competition

price leadership

the ability of the dominant firm in an oligopoly to set price levels that other firms then follow

transaction costs

the time and money consumers spend shopping for the best product at the best price