Economics Chapter 7
externality
unintended side effect that either benefits or harms a third party not involved in the activity that caused it
collusion
formal agreement to set specific prices or to otherwise behave in a cooperative manner
5 market failures
inadequate competition, inadequate information, resource immobility, public goods, and externalities
laissez-faire
"allow them to do", limited government's role to protecting property, enforcing contracts, settling disputes, and protecting firms agains foreign competition
patent
a government authority to an individual or organization conferring a right
price-fixing
agreeing to charge the same or similar prices for a product
technological monopoly
based on ownership or control of a manufacturing method
geographical monopoly
based on the absence of other sellers in a certain geographic area
positive externality
benefit someone receives who wasn't involved in the activity that generated the benefit
natural monopoly
market situation where the costs of production are minimized by having a single firm produce the product
perfect competition
market structure characterized by a large number of well-informed independent buyers and sellers who exchange identical products
oligopoly
market structure in which a few very large sellers dominate the industry
monopoly
market structure with only one seller of a particular product
Clayton Act
outlawed price discrimination
public goods
products that are collectively consumed by everyone
product differentiation
real or perceived 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
economies of scale
situation in which the average cost of production falls as the firm gets larger
Sherman Anti-trust Act
the 1st significant law against monopolies
copyright
the exclusive legal right to print, publish, perform, film or record
negative externality
the harm, cost, or inconvenience suffered by a third party because of actions by others
imperfect competition
the name give to any of three market structures that lacks one or more of the conditions required for perfect competition
price discrimination
the practice of selling the same product to different prices if it substantially lessens competition
public disclosure
the requirement that businesses reveal certain information to the public
trust
combination of firms designed to restrict competition or control prices in a particular industry
oligopoly
number of sellers: few, product: fair amount, entry into market: difficult, control over price: some
monopolistic competition
number of sellers: lots, product: fair amount, entry into market: easy, control over price: competitive
perfect competition
number of sellers: lots, product: identical, entry into market: easy, control over price: none
monopoly
number of sellers: one seller, product: none, entry into market: almost impossible, control over price: extensive