21 21 Competition and Unrestricted Markets u Competition requires a minimum of two conditions: – A relatively large number of independently acting sellers and buyers. – Freedom of sellers and buyers to enter or exit a particular industry without restrictions (unrestricted markets). And “good” competition requires adequate information to be available to all parties of a transaction as previously discussed. We want a large number of buyers and sellers to prevent what is called collusion. We may have a problem with collusion if there were only three auto manufacturers in the world. The three CEO’s could get together on a golf course some where and agree to restrict production and drive prices and profits through the roof while at the same time divide the market up so that each shares equally and will be willing to participate in this act of collusion. This may be bad news for consumers. The previous description is basically what is done within the OPEC Oil Cartel. What if there were only one manufacturer or
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