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ECON111 > Chapter 11 > Flashcards

Chapter 11 Flashcards

1
Q

What is competition good for?

A

Lower prices and innovative products

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2
Q

What are the laws that give government power to block mergers?

A

Antitrust laws

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3
Q

What is the fundamental belief behind a market-oriented economy?

A

Firms know best about actions

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4
Q

What does HHI give greater weight to?

A

Large firms

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5
Q

How have communications technologies impacted local retail businesses?

A

Increased competition

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6
Q

What do the FTC and DOJ prohibit?

A

Price fixing, bid rigging, market sharing

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7
Q

Can bundling be anticompetitive?

A

Yes

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8
Q

What can companies who are losing in the market do to combat successful companies?

A

Accuse of anticompetitive practices.

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9
Q

Why is it difficult to limit government intervention in markets?

A

Once given authority, it’s hard to establish boundaries.

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10
Q

What is a consequence of regulatory capture?

A

Higher prices, less competition

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11
Q

What is a common condition for allowing a merger?

A

Selling off certain parts

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12
Q

What is the challenge for antitrust regulators?

A

Determining merger impact on competition

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13
Q

What happens to the four-firm concentration ratio if two smallest firms merge?

A

No change

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14
Q

What HHI indicates FTC approval for a merger?

A

Less than 1,000

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15
Q

What is predatory pricing?

A

Drop prices to eliminate competition

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16
Q

What are examples of regulated monopolies in the U.S.?

A

Natural monopolies.

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17
Q

What freedom do private firms have?

A

Make own choices

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18
Q

What is U.S. antitrust law?

A

Protects against monopolies

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19
Q

What is the four-firm concentration ratio if the top two firms merge?

A

46

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20
Q

What is tying sales?

A

Buying one product requires buying another

21
Q

Who filed the lawsuits against Microsoft??

A

U.S. government

22
Q

Why is competition unlikely in a natural monopoly?

A

Cost structure issues

23
Q

What is the role of government in natural monopolies?

A

Regulation of price/output

24
Q

Can firms set their own prices?

A

Yes

25
Q

When did U.S. antitrust law originate?

A

Closing decades of the 1800s

26
Q

Why are tying sales considered problematic?

A

Forces unwanted product purchase.

27
Q

What were the allegations against Microsoft??

A

Anticompetitive and restrictive practices

28
Q

What happens when fixed costs are large relative to variable costs?

A

Natural monopoly occurs

29
Q

What triggered the Great Recession?

A

Global financial crisis

30
Q

What is it called when one firm purchases another?

A

Acquisition

31
Q

Do firms have the freedom to hire or lay off workers?

A

Yes

32
Q

What happens when competition is reduced for firms?

A

Charge more, higher profits

33
Q

How is HHI calculated?

A

Sum of squares of market shares

34
Q

What was the form of anticompetitive behavior Microsoft was accused of?

A

Exclusive dealing

35
Q

What should a natural monopoly charge?

A

Average costs and normal profit

36
Q

Can firms open or close facilities?

A

Yes

37
Q

What was Microsoft accused of tying together?

A

Windows OS and Internet Explorer

38
Q

Why is having multiple competing electricity companies costly?

A

Each company would need its own set of wires

39
Q

What is cost-plus regulation?

A

Reimbursement for costs plus extra.

40
Q

Are firms allowed to change production levels?

A

Yes

41
Q

What did the federal court decide about Microsoft’s behavior in April 2000?

A

Unfair competition

42
Q

Why was the idea of multiple phone companies costly before wireless phones?

A

Each company would need its own set of phone wires

43
Q

What happens to average costs when two smaller firms operate vs. one larger firm?

A

Smaller firms have higher costs

44
Q

What was a common pattern in price cap regulation?

A

Price declines over time

45
Q

What can large-scale production do?

A

Lower average costs

46
Q

Can firms start or stop selling products?

A

Yes

47
Q

What was created in 1914 to define unfair competition?

A

Federal Trade Commission

48
Q

What did Microsoft agree to do in the November 2002 settlement?

A

End restrictive practices

49
Q

What happens if a firm cannot keep up with price caps?

A

It may suffer losses

ECON111 (34 decks)

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