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Econ Test - Market Types, Failures, and Labor
Terms in this set (22)
The Five Types of Market Failures
Inadequate competition, inadequate information, resource immobility, externalities, public goods
Typically, market failures caused by inadequate competition are...
...monopolies or oligopolies.
The power to break up monopolies comes from a law passed in 1890, the ____________.
Sherman Antitrust Act
The government cures 'inadequate competition' market failures by using one of these three powers:
Breaking up, regulation of business practices, or merger regulation
A merger is...
...when two or more companies combine (merge).
Inadequate information refers to many types of information, especially...
...price and product.
The government cures 'inadequate information' market failures through...
...labels and regulations.
Resource immobility is...
...when resources can't move (mobilize).
Externalities are market failures because they are costs or benefits which are external to the market. This means...
...no one is required to pay for a cost or benefit.
Two examples of negative externalities:
Land use, and pollution
The government fixes "land use" market failures in two ways, through...
...covenants running with the land, and zoning laws.
The government can fix "pollution" market failures in three ways, through...
...fines, cleanup, and pollution permits.
Public goods are market failures because...
...if you leave it to the market, the market will not supply enough.
The free rider problem often leads to the need for public goods. The free rider problem is...
...where someone wants benefits, but doesn't want to pay for them.
Public goods are different from other market failures because...
...each society chooses what its public goods will be.
The three conditions required for perfect competition are:
Many buyers and sellers, identical products, and free entry into and exit out of the market.
What does having many buyers and sellers add to competition?
Drives price down to where it should be.
What does having identical products add to competition?
The only reason to buy a different product is price.
What does having free entry into and exit out of the market add to competition?
Profits will be "normal" profit; the efficient level of profit.
Monopolistic competition differs from perfect competition because of one characteristic, which is...
...that there's only one dominant seller.
What are the different kinds of market structures?
Pure competition, monopolistic competition, oligopoly, monopoly
What are the five types of monopolies?
Monopoly, natural, technological, government, geographical
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