CH.8 what is market power? The ability of a firm to influence the prices of its products and develop other competitive strategies that enable it to ear large profits over longer periods of time.
What are the characterisitcs of the monopoly model? Price-setters, barriers to entry, economies of scale.
Compare price and quantity of a monopolist to a perfect competitor. Competitive firms are price-takers while monopolists are price-setters. Competitive firms will produce at lowest point on their average total cost curve. Monopolist with market power will produce where price is greater than marginal cost.
Name 6 sources of market power.economies of scale, brarriers created by the government, input barriers, brand loyalties, consumer lock-in, network externalities.
Name 7 lock-in strategies. Contractual commitment, durable purchases, brand-specific training, infor and databases, specialized suppliers, search costs, loyalty prgrams
Discuss the demand for Kleenex. The demand has decreased significantly since 2001 because of lower-priced private brands, substitues, and advances in cold therapies.
Discuss the problem for physical retailers? the use of smart phones has made it diffuclt for retailers to change higher prices in stores than on their websites.
What was the problem with Borders Bookstores? Bordors increased the number of its stores. They transferred their online business to amazon.
Name 4 measures of market power. Lerner index, cross-price elasticity of demand, concentration ratio, hh index.
What is the purpose of antitrust laws? To limit the market pwer of firms and to regulate how firms are their market power to compete with each other.
What happened to the proposed merger of Staples and Office Depot? The FTC voted to oppose the merger on that it would harm competition