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45 Cards in this Set
- Front
- Back
A market structure with many firms selling products that are substitutes but different enough that each firm’s demand curve slopes downward; firm entry is relatively easy
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Monopolistic completion
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four basic ways
-Physical differences -Location -Services -Product image |
Product differentiation
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The difference between a firm’s profit-maximizing quantity and the quantity that minimizes average cost.
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Excess Capacity
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A market structure characterized by a few firms whose behavior is interdependent
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Oligopoly
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An oligopoly that sells a commodity or a product that does not differ across suppliers, such as an ingot of steel or a barrel of oil
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Undifferentiated oligopoly
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An oligopoly that sells products that differ across suppliers, such as automobiles or breakfast cereal.
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Differentiated Oligopoly
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An agreement among firms to increase economic profit by dividing the market or fixing the prices.
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Collusion
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A group of firms that agree to coordinate the production and pricing decisions to act like a monopolist
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Cartel
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A firm whose price is adopted by other firms in the industry
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Price Leader
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Time sold as labor
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Market Work
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Time spent getting an education or producing goods and services for personal consumption
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Nonmarket Work
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Time spent on nonworking activities
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Leisure
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A higher wage encourages more work because other activities now have a higher opportunity cost
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Substitute Effect of a Wage Increase
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A higher wage increases a worker’s income, increasing the demand for all goods, including leisure, so that the quantity of labor supplied to market work decreases
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Income Effect of a Wage Increase
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As the wage rises, the quantity of labor supplied may eventually decline; the income effect of a higher wage increases the demand for leisure, which reduces the quantity of labor supplied enough to more than offset the substitution effect of a higher wage
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Backward-Bending Supply Curve of Labor
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Markets in which a few key employees critical to the overall success of an enterprise are richly rewarded
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Winner Take All Labor Markets
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A group of workers who organize to improve their terms of employment
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Labor Union
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A union whose members have a particular skill or work at a particular craft, such as plumbers or carpenters (American Federation of Labor AFL)
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Craft Union
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A union of both skilled and unskilled workers form a particular industry, such as autoworkers or steelworkers (CIO)
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Industrial Union
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The process by which union and management negotiate a labor agreement
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Collective Bargaining
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An impartial observer who helps resolve differences between union and management
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Mediator
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Negotiation in which union and management must accept an impartial observer’s resolution of a dispute
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Binding Arbitration
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A union’s attempt to withhold labor form a firm to stop production
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Strike
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Union efforts to force employers to hire more workers than wanted or needed
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Featherbedding
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States where workers in unionized companies do not have to join the union of pay union dues
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Right to Work States
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The ability of a firm to raise its price without losing all its customers to rival firms
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Market Power
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Government regulation aimed at improving health and safety
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Social Regulation
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Government regulation of natural monopoly, where, because of economy of scale, average production cost is lowest when a single firm supplies the market
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Economic Regulation
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Government regulation aimed at preventing monopoly and fostering competition in markets where competition is desirable
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Antitrust Policy
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Government-owned or government-regulated monopolies
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Public Utilities
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Any firm or group of firms that tries to monopolize a market. Teddy Roosevelt: Trust Buster
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Trust
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First national legislation in the world against monopoly; prohibited trusts, restraint of trade, and monopolization, but the law was vague and ineffective
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Sherman Antitrust Act of 1890
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Strengthened Sherman Act, outlawed certain anticompetitive practices not prohibited by the Sherman Act, including price discrimination, trying contracts, exclusive dealing, interlocking directorates, and buying the corporate stock of a competitor
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Clayton Act of 1914
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A seller of one good requires a buyer to purchase other goods as part of the deal
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Tying Contract
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A supplier prohibits customers from buying from other suppliers of the product
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Exclusive Dealing
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A person serves on the boards of directors of two or more competing firms
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Interlocking Directorate
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Established a federal body to help enforce antitrust laws; run by commissioners assisted by economists and lawyers
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Federal Trade Commission (FTC) Act of 1914
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Passed in 1950, prevents one firm form buying the physical assets of another firm if the effect is to reduce competition.
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Celler-Kefauver Anti-Merger Act
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A merger in which one firm combines with another that produces the same product
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Horizontal Merger
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A merger in which one firm combines with another from which is had purchased inputs or to which it had sold output
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Vertical Merger
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The accused party, without admitting guilt, agrees to stop the alleged activity if the government drops the charges
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Consent Decree
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In antitrust law, business practices that are deemed illegal, regardless of their economic rationale or their consequences
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Per Se Illegal
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Before ruling on the legality of certain business practices, a court examines why they were undertaken and what effect they have on market competition
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Rule of Reason
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Pricing tactics employed by a dominant firm to drive competitors out of business, such as temporarily selling below marginal cost or dropping the price only in certain markets
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Predatory Pricing
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A merger of firms in different industries
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Conglomerate Merger
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