Chapter 9

hansmeyer's version from 2015-04-28 10:54


Question Answer
market structurethe extent to which competition prevails in particular markets
perfect competitionmarket situation in which there are numerous buyers and sellers, and no single buyer or seller can affect price
5 conditions for perfect competitionlarge market, nearly identical product, easy entry and exit, easy obtainable information, indpendence
monopolymarket situation in which a single supplier makes up an entire industry for a good or service with no close substitutes
barriers to entry obstacles to competition that prevent others from entering a market
5 conditions for a monopolysingle seller, no substitutes, barriers to entry, almost complete control of market price
economies of scalelow production costs resulting from the large size of output
patentexclusive right to make, use, or sell an invention for a specified number of years
copyrightexclusive right to sell, publish, or reproduce creative works for a specified number of years
types of monopoliesnatural, geographical, technological, government
natural monopoly government grants exclusive rights to companies that provide things like utilities, bus service, and cable tv
geographical monopolysetting of the business is isolated because the potential for profits is small other businesses choose not enter the market
technological monopolyif you invent something, a patent gives you exclusive rights
government monopolymonopoly is held by the government
oligopolyindustry dominated by a few suppliers who have some control over price
5 conditions of an oligopolydomination by few sellers, barriers to entry, identical or slightly different products, nonprice competition, interdependence
product differentiationmanufacturers' use of minor differences in quality and features to try to differentiate between similar goods and services
collusionillegal act in which competing firms of an oligopoly secretly agree to raise prices or divide the market
cartelarrangement among groups of industrial businesses to reduce international competition by controlling the price, product, and distribution of goods
monopolistic competitionmarket situation in which a large number of sellers offer similar but slightly different products and in which each has some control over price
5 conditions of monopolistic competitionnumerous sellers, easy entry, differentiated products, nonprice competition, some control over price
interlocking directoratea board of directors, the majority of whose members also serve as the board of directors of a competing corporation
antitrust legislationfederal and state laws passed to prevent new monopolies from forming and to break up those that already exist
Sherman Antitrust ActPassed in 1890 to protect trade and commerce against unlawful restraint and monopoly
Clayton ActPassed in 1914 and limited a number of very specific business practices that lessened competition substantially
mergersthe legal combination of two or more companies that become one corporation
horizontal mergerwhen the corporations that merge are in the same business
vertical mergerwhen corporations involved in a "chain" of supply merge
conglomeratelarge corporation made up of smaller corporations dealing in unrelated businesses
deregulationreduction of government regulation and control over business activity