Chapter 7-ECON

market structure

The nature and degree of competition among firms operating in the same industry.

positive externality

beneficial side effect that affects an uninvolved third party

what is one example of how local or state governmetn allows and regulates a monopoly?

cable tv, water, electric- must argue its case before a commission

market failure

condition that causes a competitive market to fail

what government actions led to a modification of free enterprise?

congress passed laws to prevent evil monopolies and protect rights of workers, food and drug laws, regulation to prevent price gouging.

the problem with externalities is that they .... the decisions made by consumers and producers

distort

externality

economic side effect that affects an uninvolved third party

many activities generate some kind of ..... or unintended side effect that either benefits or harms a third party not involved in the activity that caused it.

externality

A .... is a .... because its costs and benefits are not reflected in the market prices that buyers and sellers pay

externality, market failure

public goods

goods or services whose benefits are available to everyone and are paid for collectively

negative externality

harmful side effect that affects an uninvolved third party

what are two examples of needed public goods that are provided by the government?

highways, museums and libraries, education (IK its mroe than 2)

trust

illegal combination of corporations or companies organized to hinder competition

........... may also enable a business to influence politicians in order to get special treatment that enriches its managers

inadequate competition

One is inefficient resource allocation because............. tends to reduce the efficient use of scarce resources

inadequate competition

what are two market failures the government is able to correct?

inadequate information and public goods

Another form of.....

market failure

Some information is harder to find than other kinds, and that can lead to a .....

market failure

Oligopoly

market structure in which a few large sellers dominate the industry

geographic monopoly

market structure in which one firm has a monopoly in a geographic area

imperfect competition

market structure that does not meet all conditions of perfect competition

natural monopoly

market structure where average costs of production are lowest when a single firm exists

monopoly

market structure with a single seller of a particular product

perfect competition

market structure with many well-informed and independent buyers and sellers who exchange identical products

what was the antitrust legislation of the late 1800s trying to restrict?

monopolies and trust

Technical monopoly

monopoly based on a firm's ownership or control of a production method, process, or other scientific advance

under what condition are monopolies acceptable?

natural, cant take advantage of consumers

A ..... is the harm, cost, or inconvenience suffered by a third party because of actions by others.

negative externality

pollution is an example of a

negative externality

Laissez-faire

philosophy that government should not interfere with business activity

A .... is a benefit received by someone who was not involved in the activity that generated the benefit.

positive externality

Education is an example of .....

positive externality

price discrimination

practice of selling the product at different prices to different buyers

what is the advtange to the public of truth-in-advertising laws?

prevents sellers from making false claims

shows up in the form of ....... those products that are collectively consumed by everyone and whose use by one individual does not diminish the satisfaction or value received by others.

public goods

product differentiation

real or imagined differences between competing products in the same industry

cease and desist order

ruling requiring a company to stop an unfair business practice that reduces or limits competition

nonprice competition

sales strategy focusing on a product's appearance, quality, or design rather than its price

economies of scale

situation in which the average cost of production falls as a firm gets larger

what was the purpose of the clayton antitrust act of 1914, and what practice did it outlaw?

strengthened the sherman act by outlawing price discrimination.... give gov't greater power against monopolies

public disclosure

the requirement that businesses reveal information to the public about its products or operations

what was the purpose of the sherman antitrust act?

to protect trade and commerce against unlawful restraint and monopoly

what is the purpose of public disclosure?

to provide full transparency to the public

Name and describe the 4 different types of monopolies

-a government monopoly involves products that private industries can't provide -Technological: based on ownership or control of manufacturing method process or other scientific advance -natural: market structure in which costs are minimized by having a single firm produce the product -geographic: based on the absence of other sellers in a geographic region

List the 3 imperfect competition market structures.

-monopoly: 1 company dominating -oligopoly: few large sellers dominating -monopolistic: can change $ to increase $

what is the role of government under Adam Smith's laissez-faire philosophy?

-the governments role is to protect property, enforce contracts, settle disputes, and protect firms against foreign competitions

define market structure

-the nature and degree of competition among firms in the same industry

what are the five major conditions that characterize perfectly competitive markets?

-there are a large # of buyers and sellers. No single group is powerful enough to affect the products' price. -Buyers and sellers deal in identical products. There is no need to advertise. -Buyers and sellers act independently. Sellers compete against each other for the consumers' $. Buyers compete for the best price. -Buyers and sellers are well informed about the product and price. Sellers can match the price of a competitor. Buyers know the best price to pay. -Buyers and sellers are free to enter into business. No single producer in any industry can keep the market to themselves.

government monopoly

a monopoly owned and operated by the government

To allocate resources efficiently, consumers, business people, and government officials must have..... about market conditions

adequate information

collusion

agreement, usually illegal, among producers to fix prices, limit output, or divide markets

price fixing

agreement, usually illegal, by firms to charge the same price for a product

A difficult problem in any economy is resource immobility, when land, capital, labor, and entrepreneurs do not move to markets in which the returns are the highest and sometimes remain......

unemployed