CHAPTER 10 Flashcards
Natural monopolies
Economies of scale allow only a single seller to achieve lowest average total cost
Market failure
When markets produce outcomes that are inefficient or inequitable
Natural monopolies challenges
Policy makers to gain low cost efficiencies of economies of scale and avoid inefficiencies of monopoly’s restricted output and higher price
Crown corporations
Publicly owned businesses in Canada
Rate of return regulation
Sets a price allowing the regulated monopoly to just cover average total costs, including normal profits
Game theory
A mathematical tool for understanding how players make decisions, taking into account what they expect rivals to do
Prisoner’s dilemma
A game with two players who must each make a strategic choice, where results depend on other player’s choice
Nash equilibrium
Outcome of game in which the school player makes her or his own best choice given the choice of the other player
Collusion
Conspiracy to cheat or deceive others
Cartel
Association of suppliers formed to maintain high prices and restrict competition
Desirable competitive behaviour
Ana Croce attempt to increase profits and gain the market power of monopoly.
Hard to distinguish from undesirable collusive behaviour
Caveat emptor
The buyer alone is responsible for checking quality of products before purchasing
Public interest view
Government regulation eliminates waste, achieves efficiency, promotes public interest
Capture view
Government regulation benefits regulated businesses, not public interest
Government failure
When regulations fail to serve the public interest
