Lecture 7_Market Structures_2018.pdf

Alternatively they might agree to restrict output to

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alternatively, they might agree to restrict output to drive up prices Market allocation businesses divide up market, control own territory Predatory pricing set prices below cost to drive out small producers used by cartels or large producers
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PROTECTING CONSUMERS KEY CONCEPTS Cease and desist order requires firm to stop unfair business practice issued when business behavior is unfair to competitors or consumers Public disclosure requires businesses to reveal product information enables consumers to make informed buying decisions
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PROTECTING CONSUMERS Consumer Protection Agencies Government protects consumers by regulating different aspects of business Federal Trade Commission promotes competition, prevents unfair practices Other agencies regulate specific industries, protect consumers
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DEREGULATING INDUSTRIES KEY CONCEPTS 20th century regulation focused on public service industries Deregulation reduces or removes government oversight and control Deregulation may lead to fewer consumer protections Usually results in lower prices since markets become more competitive with regulated prices, firms have no incentive to reduce costs
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DEREGULATING INDUSTRIES Deregulating the Airlines Airline Deregulation Act of 1978 removed control of routes and rates Benefits New carriers entered market: greater efficiency, lower prices More people chose plane travel Problems Quality of service declined; airports became crowded Multiple bankruptcies resulted: layoffs, lower wages, lost pensions
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REVIEWING KEY CONCEPTS Explain the differences between the terms in each of these pairs: trust and merger price fixing and predatory pricing regulation and deregulation
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COMPETITION IN GADGETS AND GIZMOS Background Billions of people around the world own cell phones. As the market becomes saturated, manufacturers are adding new gadgets and gizmos to increase sales. What’s the Issue? What affects your selection of a cell phone?
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COMPETITION IN GADGETS AND GIZMOS {CONTINUED} Thinking Economically 1. Compare the product described in document A and the one illustrated in B. Are cell phones likely to become more or less complex? Explain why or why not. 2. Which of the four market structures best fits the market for cellular phones? Use evidence from documents A and C to explain your answer. 3. In documents A and C, compare the role that market research plays in the development of new products. Use evidence from the documents.
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