market failure recap

Question 1

What is a merger(buisness practices to reduce competition?

Answer 1

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

Question 2

What is market power

Answer 2

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.

Question 3

What are regulations for

Answer 3

Governments can use regulation to reduce or eliminate the market failure associated with monopoly firms

Question 4

When is it beneficial for a monopoly?

Answer 4

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

Question 5

TYPES OF REGULATIONS

Answer 5

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