Market Structures - Folsom Cordova Unified School District ...

Market Structures - Folsom Cordova Unified School District ...

Market Structures Chapter 7 Perfect Competition Large numbers of buyers and sellers

Buyers and sellers deal in identical products Each buyer and seller acts independently Buyers and sellers are reasonably well-informed about prices and products Buyers and sellers are free to enter and leave the market Imperfect Competition Occurs when one of the five conditions

doesnt exist Business Control on Price <=None====================.Complete => Monopolies Natural Monopoly- exists when a variety of factors make competition unworkable, financially unfeasible or impossible

Geographical Monopoly- When only one business provides products or services to a local area, Technological Monopoly- A business that's first to market a product or service may get a patent or copyright Government Regulation

Prevent excess price Quality of service Monopsony Power Promote competition Natural Monopolies

Market Failures Inadequate competition- When adequate competition does not exist Inadequate information- Buyers and sellers are not well informed Resource Immobility-Resources are not free to move from one industry to another. Public Goods-Public goods are those goods and services provided by the government because a market failed to provide them. Negative externalities- harmful side effect that affects an uninvolved third

party. In most events, it constitutes external cost. Positive Externalities-beneficial side effect that affects an uninvolved third party. Externalities Positive production externality: When a farm's production increases the well-being of others but the farm is not compensated by those others. Example: Beehives of honey producers have a positive impact on pollination

and agricultural output Negative production externality: When a firm's production reduces the well-being of others who are not compensated by the firm. Example: steel plant pollutes a river but plant does not face any pollution regulation Price Controls Price discrimination- pricing strategy that charges

customers different prices for the same product or service. Laws Regulating Business Sherman Act- Passed in 1890, prohibits certain business activities that federal government regulators deem to be anti-competitive, and requires the federal government to investigate and pursue trusts

Laws Regulating Business Clayton Act- Passed in 1914, proscribes certain additional activities that had been discovered to fall outside the scope of the Sherman Act price discrimination between different purchasers, if such discrimination tends to create a monopoly exclusive dealing agreements tying arrangements mergers and acquisitions that substantially reduce market competition

Laws Regulating Business RobinsonPatman Act of 1936 amended the Clayton Act. The amendment proscribed certain anti-competitive practices in which manufacturers engaged in price discrimination against equally-situated distributors. Laws Regulating Business Federal Trade Commission Act of 1914 established the Federal Trade Commission. The Act, outlaws unfair

methods of competition and outlaws unfair acts or practices that affect commerce. Government Enforcement

Federal Trade Commission (FTC) Food & Drug Administration (FDA) Federal Communications Commission (FCC) Equal Employment Opportunity Commission (EEOC) Occupational Safety & Health Administration (OSHA) Government Enforcement

Securities & Exchange Commission (SEC) Environmental Protection Agency (EPA) Federal Aviation Administration (FAA) National Labor Relations Board (NLRB)

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