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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
