Exam 3 Flashcards
What is a monopoly?
When one firm produces all the output in a market.
What are the different types of monopoly?
- Natural Monopoly
- Legal Monopoly
- Monopolistic Competition
- Pure Monopoly
Why do they allow for monopolies?
- in order to incentivize innovation
- in some markets it happens to ensure peopl have access to the good or service (e.g. electrict, water comapnies)
What is monopolistic competition?
When many firms are selling similar but different products.
What is an oligopoly?
When a few large firms have all or most of the sales in an industry
What is a merger?
When two firms combine in to one
What is an acquisition?
When one firm buys another
What is a Natural Monopoly?
A market with high barriers to entry and start-up costs that prevent any rivals from competing.
What is the purpose of Anti-Trust laws?
laws that seek to ensure active competition in markets.
What is an externality/spillover?
a market exchange that affects a third party who is outside
What is a negative externality?
a situation where a third party, outside the transaction, suffers from a market transaction by others
What are private costs?
any cost that a person or firm pays in order to buy or produce goods and services
What is a subsidy?
The government pays a firm directly or reduces the firm’s taxes if the firm carries out certain actions.
What are social costs?
private costs + externalities passed on to society
What are public goods?
a good that everyone can use for free that is non-excludable
