market failure recap Flashcards
What is a merger(buisness practices to reduce competition?
Two or more firms join together to form one larger firm. If a merger results in benefits to consumers then it is allowed , but if it- substantially reduces competition in the market then it is prohibited
What is market power
A firm has market power if it can affect the market price by varying its output.
The term market power refers to the ability of a firm (or group of firms) to raise and
maintain price above the level that would prevail under a competitive market.
What are regulations for
Governments can use regulation to reduce or eliminate the market failure associated with monopoly firms
When is it beneficial for a monopoly?
This is an industry where it is efficient to have only one firms in the market due to significant economies of scale
EXAMPLES: Utility companies such as the Water Authority and electricity providers
TYPES OF REGULATIONS
limit the ability of businesses to compete
limit the number of types of buisnesses
reduce the incentive for buisnesses to compete
limit the choices and information avaliable to consumers