BUS 202 Exam 2

Antitrust law

legislation to prevent new monopolies from forming and police those that already exist

Trust

A group of corporations run by a single board of directors

Sherman act

deals with mergers, prohibits monopolies or combinations in restraint of trade

clayton act

makes price discrimination, exclusive dealing, tying contracts, and acquiring a competitor if that reduces competition illegal

Federal Trade Commission Act

declares illegal "unfair methods of compmetition in commerce"

Robinson Patman Act

attempts to protect small businesses from the competition of large chain stores; prohibits suppliers fro offering special discounts to large chainn stores only

Wheeler-Lea Act

Empowers the FTC to deal with false & deceptive acts or practices like false advertising

horizontal merger

between firms that are selling similar products in the same market

vertical merger

between companies in the same industry but at different stages of the production process

Celler-Kefauver Act

prevents vertical and conglomerate mergers that can reduce competition

comglomerate mergers

a merger between companies in different industries

network good

a good whose value increases as the expected number of units sold increases

lock-in effect

The situation in which a product or technology becomes the standard and is difficult or impossible to dislodge from that role.

natural monopoly

economies of scale are so pronounced or so large in an industry that only one firm can survive

capture theory of regulation

A theory holding that, no matter what the motive is for the initial regulation and the establishment of the regulatory agency, eventually the agency will be captured (controlled) by the special interests of the industry being regulated.

public interest theory of regulation

A theory holding that regulators are seeking to do—and will do through regulation—what is in the best interest of the public or society at large.

public choice theory of regulation

A theory holding that regulators are seeking to do—and will do through regulation—what is in their best interest (specifically to enhance their power and the size and budget of their regulatory agencies).

regulatory lag

difference in time between high benefits and the time that they are regulated

Oligopoly

few sellers, many buyers, selling either homogenous or differentiated products, significant barriers to entry

Monopolistic competition

many sellers & buyers, each firms sells slightly different products, easy entry & exit indicating 0 economic profit

cartel theory

oligopolistic firms act as if there were only one firm in the industry

cartel

group of firms that reduces output & increases price in an effort to increase joint profit. illegal in US

perfect competition

many buyers and sellers, identical products, perfect information, free entry & exit, 0 economic profit

profit maximization rule

MC=MR

Resource allocative efficiency

The situation in which firms produce the quantity of output at which price equals marginal cost: P=MC, only occurs in perfect competition