ECON FINAL Flashcards
monopolistic competition
size- many firms
price- price seekers
product- differentiated
barriers- none
factors affecting the success of cartels
1) fewer firms are easier to coordinate
2) production of homogenous products
3) growing industries
4) buyer turnover (less is desirable)
5) buyers’ ability to control the market
What is an oligopoly?
a few firms that produce a differentiated or undifferentiated product. the similar products lead to a strong emphasis on product price.
What kind of products do monopolies produce?
differentiated products, for which there is no close substitute.
2 characteristics of oligopoly
1) mutually independent
2) high cost or government limitations
long run monopoly profit
there are no new entries into the market, so the price cannot be driven down toward the equilibrium.
What is imperfect competition?
max utility subject to constraint, with a hatred toward competition from other firms, as it hurts profit capability
public franchise
government grants the exclusive right to produce something.
limit pricing
pricing below profit max, in order to ward off new entries into the market
Hard cartel
fixed price by agreement. seeking to maximize industry profit as opposed to company profit
what is a cartel?
a group of firms that behave like a monopoly to ensure that entry into the market is almost impossible..
soft cartel
government limits entry into the market. Doctors, lawyers, medical professionals, etc…
collusion
non competitive agreement between rivals which attempts to disrupt the market equilibrium
what do cartels aim to do?
decrease output and increase profit.
