chapter 7: market structures

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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


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