A free market in which no buyer or seller has the power to significantly affect the prices at which goods are being exchanged.
A market in which a single firm is the only seller in the market and which new sellers are barred from entering.
A market shared by a relatively small number of large firms that together can exercise some influence on process.
Any forum in which people come together for the purpose of exchanging ownership of goods or money.
The point at which the amount of goods buyers want to buy exactly equals the amount of goods sellers want to sell, and at which the highest price buyers are willing to pay exactly equals the lowest prices sellers are willing to take.
A line on a graph indicating the most that customers would be willing to pay for a unit of some product when they buy different quantities of those products.
A line on a graph indicating the prices producers must charge to cover the average costs to supplying a given amount of a commodity.
PRINCIPLE OF DIMINISHING MARGINAL UTILITY:
Each additional item a person consumes is less satisfying than each of the earlier items the person consumed.
PRINCIPLE OF INCREASING MARGINAL COSTS:
After a certain point, each additional item a seller produces costs more to produce than earlier items.
POINT OF EQUILIBRIUM:
The point at which the supply and demand curves meet, so amount buyers want to buy equals amount suppliers want to sell and price buyers are willing to pay equals price sellers are willing to take.
Perfectly Competitive Free Markets are characterized by the following 7 features:
- There are numerous buyers and sellers, none of whom has a substantial share of the market.
- All buyers and sellers can freely and immediately enter or leave the market.
- Every buyer and seller has full and perfect knowledge of what every other buyer and seller is doing, including knowledge of prices, quantities, and quality of all goods being bought and sold.
- The goods being sold in the market are so similar to each other that no one cares from which each buys or sells.
- The costs and benefits of producing or using the goods being exchanged are borne entirely by those buying or selling the goods and not by any other external parties.
- All buyers and sellers are utility maximizers. Each tries to get as much as possible for as little as possible.
- No external parties(such as government) regulate the price, quantity, or quality of any of the goods being bought and sold in the market.
MORAL OUTCOMES OF PERFECTLY COMPETITIVE MARKETS:
- Achieve a certain kind of justice.
- Satisfy a certain version of utilitarianism.
- Respect certain kinds of moral rights.
MONOPOLY MARKET CHARACTERISTICS:
- One Seller
- High Entry Barriers
- Quantity below Equilibrium
- Prices above equilibrium and Supply Curve
- Can extract monopoly profit.
IMPERFECTLY COMPETITIVE MARKETS:
Markets that lie somewhere between the two extremes of the perfectly competitive market with innumerable sellers and the pure monopoly market with only one seller.
HIGHLY CONCENTRATED MARKETS:
Oligopoly markets that are determined by a few large firms.
The unification of two or more companies that were formerly competing in the same line of Business.
An agreement between firms to set their prices at artificially high levels.
MANIPULATION OF SUPPLY:
When firms in an oligopoly industry agree to limit their production so that prices rise to levels higher than those that would result from free competition.
EXCLUSIVE DEALING ARRANGEMENTS:
When a firm sells to a retailer on condition that the retailer will not purchase any products from other companies and/or will not sell outside of a certain geographical area.
When a firm sells a buyer a certain good only on condition that the buyer agrees to purchase certain other goods from the firm.
RETAIL PRICE MAINTENANCE AGREEMENTS:
A manufacturer sells to retailers only on condition that they agree to charge the same set retail prices for its goods.
To charge different prices to different buyers for identical goods or services.
UNETHICAL PRACTICES IN OLIGOPOLY INDUSTRIES:
- Price – Fixing
- Manipulation of supply
- Exclusive dealing arrangements
- Tying Arrangements
- Retail Price Maintenance Agreements
- Price Discrimination
- The firm recognized as the industry leader in oligopoly industries for the purpose of setting prices based on levels announced by that.
An alliance of previously competitive oligopolists formed to take advantages of monopoly powers.
MAIN VIEWS OF OLIGOPOLY POWER:
- Do-Nothing View
- Anti trust View
- Regulation View