Economics

a market with just one firm that can earn continual profit if competitors have difficulty entering the market

monopoly

describes the nature of competition within a market

market structure

A market that is not perfectly ____ has ____ competition

competitive, imperfect

Arises when there is not enough competition among firms from raising their price above the equilibrium level determined by supply and demand.

imperfect competition

A monopoly has ____ competition

imperfect

Includes all of those products that consumers consider to be close substitutes for a particular good

product market

In order to know the type of market structure (competition) the ____ must be identified.

product market

the one supplier in a monopoly

monopolist

the ability of a firm to change the market price of a good or service

market power

A monopoly has more ____ because they do not have ____

power, competition

obstacles that prevent firms from entering particular markets

barriers to entry

What are 4 barriers to entry?

Start-up costs, exclusive access to a critical input, government protection, unfair practices

What is an example of a natural monopoly?

a water company

a market in which the start up costs make it prohibitively expensive for more than one firm to operate

Natural monopoly

The total cost of production divided by the quantity of output

average cost

The average cost ____ as output ____

falls, grows

Example of a U.S. company that controlled critical inputs in order to keep other companies from competing

U.S. Steel

allows a person to be the only one to publish or sell a particular piece of writing art or music

Document issued by a government that gives a person or company the right to be the only one to make or sell a new invention

patent

governments can also protect a company by exempting them from ____ ____ that are designed to keep markets competitive

antitrust regulations

List 3 threats to a Monopolist

Technological change, the entry of international firms, the end of government protection (copyright good for 70 years)

In a perfectly ____ market the price is determined by ____ and ____

competitive, supply, demand

A monopolist has no ____

competitors

A monopolist like other types of firms is interested in maximizing ____ not ____

profit, revenue

Monopolists earn profits but often result in an inefficient ____ ____ ____

allocation of resources

the practice of charging different customers different prices for the same good

price discrimination

the highest price he/she is willing to pay to own one more unit of the product

reservation price

Before a company can use price discrimination, a customer must have a higher ____ ____.

reservation price

Your clothing, jewelry, or eagerness for a product can influence _____ ____

price discrimination

A monopoly can hinder ____

innovation

Innovative new products can improve our ____ ____ ____ and promote ____ ____

standard of living, economic growth

When there are many firms in a market, they can gain market power if they differentiate their _____

products

When there are only a few firms in a market, they might be able to work together to reduce ____ below the competitive level in order to increase the price and profits

output

A market with a small number of firms

oligopoly

A group of firms that agree to work together and act like a monopoly

cartel

Example of a cartel

OPEC

What does OPEC stand for?

Organization of Petroleum Exporting Countries

Many firms supply similar but not identical goods

Monopolistic competition

What is an example of monopolistic competition?

fast food

Goods and services that differ somewhat from other products in the marketplace

differentiated product

What are 3 ways to build brand loyalty?

Advertising, quality of service, reward cards or points and coupons

Perfect competition results in an _____ level of production

efficient

Policies by which the government sets the prices in an industry

price controls

Price controls are not ____

common

The goal in setting price controls is to bring about the ____ quantity of a good and protect ____

efficient, consumers

A set of laws designed to promote competition in the marketplace

antitrust policy

A combination of corporations formed for the purpose of reducing competition and controlling price in an industry

trust

Antitrust laws promote ____

competition

Antitrust laws can block firms from merging together if the merger is likely to reduce _____ and harm _____.

competition, consumers

A monopoly is not ____

illegal

Improper conduct by a monopoly is ____

illegal

The Clayton Act prevents ____

tying

When a customer wants to buy a product from one firm and he is required to buy other products from the same firm.

tying

What are 2 Federal agencies that enforce antitrust laws

Antitrust Division of the Department of Justice, Federal Trade Commission

the two Federal agencies that enforce antitrust laws can investigate and file a lawsuit against a company they believe violates ____ laws.

antitrust

The Federal agencies can stop a ____ or acquisition if they think the price will be raised by 5%.

merger

What does SEC stand for?

Securities and Exchange Commission

What does FCC stand for?

Federal Communications Commission

Who created Standard Oil?

John D. Rockefeller

What company did the Supreme Court break up in 1911 and why?

Standard Oil, it bought up competition and partnered with railway firms to drop the prices of oil to drive others out of business

What CEO did not have to break up his company in the early 1900’s and why?

Henry Ford, he fought to provide an affordable product to the people