Chapters 6 & 7 Flashcards
makes possible a better standard of living for everyone
competition
groups of firms that produce similar products or provide similar services
industries
Criteria of perfect competition
-large numbers of independent sellers and buyers
-all firm produce a standardized product
-firms must have free access to the market
-relevant market information must be made available
a firm that has no real control over the price it receives for its product
price taker
when a single firm is the only supplier of a good for which no substitute exists
monopoly
criteria for a monopoly
-one firm must be the sole supplier of a good or service
-there must be no close substitutes for the firm’s products
-entry into the market must be blocked
a monopoly granted by the government in order to encourage production
legal monopoly
a monopoly that occurs when a single firm can satisfy the demand for a good more efficiently than multiple firms could
natural monopoly
a market in which there are a large number of firms that provide differentiated products and have free access to the market
monopolistic competition
criteria for monopolistic completion
-must be a large number of firms in the market
-firms provide differentiated products
-firms are able to easily enter or exit the market
a market that occurs only when an industry is dominated by only a few firms
oligopoly
criteria for an oligopoly
-only a few firms in the entire industry
-firms may sell products that are either differentiated or virtually the same
-potential firms are discouraged by the existence of significant entry barriers
the monopolistic practice in which firms secretly agree to charge the same high prices and offer only the same sort of goods and services
collusion
the biggest defender of the American freedom from harmful monopolies
the operation of the free market itself
law passed in 1890 that was one of the first and most important of the U.S. anti-trust laws
Sherman Act
a collusion of businesses which join together to restrict or eliminate competition
trust
U.S. antitrust law passed in 1914 which outlawed several business practices that were not specifically addressed in earlier anti-trust laws
Clayton Act
force a consumer to buy a certain product before he can buy the product he really wants
Tying contracts
selling the same type of goods at different prices to different buyers
price discrimination
a governmental agency whose purpose is to investigate trade practices
Federal Trade Commission (FTC)
the quality of producing effectively with a minimum of waste
efficiency
the total amount invested in the production of a good
input
the total amount of a good that is produced
output
the sum cost of all the factors of production used in making goods
total cost
