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