market structures and government regulations

perfect (pure) competition

theoretical market structure characterized by a large number of well-informed independent buyers and sellers who exchange identical products and have freedom of entry and exit.

product differentiation

real or imagined differences between competing products in the same industry

price discrimination

practice of charging different customers different prices for the same product

industry

group of firms producing similar of identical products

monopolistic competition

market structure having all conditions of pure competition except for identical products; a form of imperfect competition

oligopoly

market structure in which a few large sellers dominate the market and have the ability to affect prices in the industry; form of imperfect competition

monopoly

market structure characterized by a single producer; form of imperfect competition

government monopoly

monopoly created/owned by the government

non-price competition

this includes various forms of advertising giveaways or promotions that induce the consumer to pay attention to that particular product.

collusion

illegal agreement among similar producers to control prices, limit output, divide markets, or reduce competition in other forms.

price fixing

the maintaining of prices at a certain level by agreement between competing sellers.

laisez-faire

monopolies might actually be more common because the government would play little role in controlling their development however due to economic regulations by the government very few monopolies exist today.

market failure

condition where lack any of the requirements for a competitive market (competition, knowledge of prices, etc) leads to an inefficient allocation of resources characterized by too much or too little being produced

public good

economic products that are consumed collectively, like highways and police protection

spillover effect

uncompensated side effects that either benefit or harm a third party not involved in the activity that caused it

cost-benefit analysis

calculation that compares the cost of an action to its benefits

cease and desist

ruling requiring a company to stop an unfair business practice that reduces or limits competition

Public disclosure

Requirement forcing a business to reveal information about its products or its operations to the public

Transparency

Term used to indicate that information and actions are not hidden, and instead are easily available for review

5 Causes of Market Failures

1. Not Enough Competition (Inadequate competition)

2. Not Enough Information

3. Resources That Can't or Won't Move (Resource Immobility)

4. Too Few Public Goods

5. Externalities or Spillover Effects

Geographic monopoly

Market structure in which a firm has a monopoly because of its location or the small size of the market

Technological monopoly

Market structure in which a firm has a monopoly because it owns or controls a manufacturing method, process, or other scientific advantage

Natural monopoly

Market structure in which average costs of production are lowest when all output is produced by a single firm

patent

an exclusive right to manufacture, use, or sell any new and useful invention for a specific period (usually 20 years)

copyright

the exclusive right of authors or artists to publish, sell, or reproduce their work for their lifetime plus 70 years