chapter 4 competition and market structure
trust
a combination of firms or corporations formed by a legal agreement, especially to reduce competition
price war
occurs when two or more firms compete primarily by lowering their prices
predatory pricing
selling a product below cost to drive competitors out of the market
market power
the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices
Deregulation
the removal of some government controls over a market
explain how pure competition and monopolistic competition are similar
In a monopolistic market, there is only one firm that dictates the price and supply levels of goods and services. A perfectly competitive market is composed of many firms, where no one firm has market control.
Why do monopolists practice price discrimination
In monopoly, there is a single seller of a product called monopolist. The monopolist has control over pricing, demand, and supply decisions, thus, sets prices in a way, so that maximum profit can be earned. ... This practice of charging different prices for identical product is called price discrimination.
Cartel
a group of firms acting in unison
monopolistic competition
a market structure in which many companies sell products that are similar but not identical
natural monopoly
a market that runs most efficiently when one large firm supplies all of the output
PRICE DESCRIMINATION
the practice of charging different prices to different buyers for goods of like grade and quality
license
A clear way to define the copyright of your creative work so people know how it can be used.
Monopoly
A market in which there are many buyers but only one seller.
Oligopoly
A market structure in which a few large firms dominate a market
what kind of rules and regulations does the government use to break up monopolies
Price capping - limiting price increases. Regulation of mergers. Breaking up monopolies
patent
evident or obvious
How can technology affect a monopoly
Sometimes the development of new technology can destroy a natural monopoly. A new innovation can cut fixed costs and make small companies as efficient as one large firm.
Franchise
The right to sell a good or service within an exclusive market
what power does a market leader in an oligopoly
They have to power to set prices and communicate with the other firms in the oligopoly.
Differentiation
actually differentiating the market offering to create superior customer value
price fixing
an agreement among firms to charge one price for the same good
non-price competition
competition based on factors other than price
antitrust laws
laws that encourage competition in the marketplace
government monopoly
monopoly created and/or owned by the government
Cullusion
secret agreement
what do firms stand to gain by increasing market power
they can control the price
merger
when two or more companies join to form a single firm
Name three barriers to entry in a market that can lead to the formation of an oligopoly
The three major barriers that can lead to oligopoly are: 1) Many small business owners want to put up small business with same products at the same market. 2) The prices are not competitive enough with regards to its product so the business owners can put its business in a not so competitive market and 3) The market itself has the same product that can lead to a competition if it has big competitors with the same products.
Give examples of price discrimination
Price discrimination occurs when identical goods or services are sold at different prices from the same provider. ... Examples of forms of price discrimination include coupons, age discounts, occupational discounts, retail incentives, gender based pricing, financial aid, and haggling.
List & explain three market practices that the government bans to protect competition
Regulates business practices. Breaks up monopolies. Blocks mergers
1997, the government accused Microsoft of predatory pricing. Does the rule against predatory pricing make sense in this case? Why or why not?
Yes it does because they were trying to run a small business out of service by lowering their prices and taking a loss to get rid of competition.
economics of scale
factors that cause a producer's average cost per unit to fall as output rises
How does price discrimination benefit producers and consumers
firms often offer a 10% reduction to students. Students typically have lower income so their demand is more elastic. This means they benefit from lower prices.