Econ Quiz 7 Flashcards
Market in which most sales are made by a few firms, each large enough to affect the market price by its own actions
Oligopoly
Products distinguished from similar products by characteristics like quality, design, location, and method of promotion.
Differentiated products
Undifferentiated products; products that are identical to, or indistinguishable from, one another
Homogeneous products
Four types of market structure
Pure competition, monopoly, monopolistic competition, oligopoly
Many producers, many real or perceived differences in products, some constraints on pricing power, because other goods are still substitutes; name comes from exercise of some “monopoly power” in market place
Monopolistic Competition
The percent of sales made by the four largest firms
Four firm concentration rate
The combination of two or more firms competing in the same market with the same good or service
Horizontal merger
The combination of two or more firms involved in different stages of producing the same good or service
Vertical merger
The joining of firms in completely unrelated industries
Conglomerate merger
Relating to legislation preventing or controlling trusts or other monopolies, with the intention of promoting competition in business
Antitrust
“Every person who shall monopolize, or attempt to monopolize… any part of the trade or commerce among several states… shall be deemed guilty of a felony”
Sherman Antitrust Act (1890)
Outlaws “tying contracts”; bans interlocking directorates; bans mergers via acquiring common stock; BUT primarily only if these practices lessen competition
Clayton Act (1914)
Prohibits “unfair methods of competition”
FTC (1914)
Related to structure, illegal if they provide; a firm is too large “unreasonable” restraints to trade
- Against huge companies with a lot of power
- Haven’t been prosecuted in decades
Size Offenses
How a business operates or “gets by”
- Retail price “maintenance”
- Predatory pricing
- Tying contracts
- Price discrimination
Conduct offenses
