1. Market Failures

2. Pop Quiz 1.) List three types of monopolies? 2.) List the 4 types of market structures discussed in class. 3.) There are more monopolies than oligopolies in our society. True / False 4.) A market with 2 or three sellers and lots of buyers is called ______________ 5.) A market with lots of sellers and buyers and identical products is considered ____.

3. 6.) What is the one difference between perfect competition and Monopolistic Competition? 7.) Which of the following is best associated with Monopolistic competition? a. Price fixing b. Product differentiation c. Identical Products d. Small # of sellers 8.) What type of market structure do consumers want most to insure the cheapest products? 9.) If you own a business what type of market structure do you want? 10.) Which of the four market structures discussed is the most common in our society?

4. Market Failures Market Failure: –The market fails to sustain itself. –Usually because one of the following isn’t true: Not enough competition Buyers and sellers aren’t informed enough Resources aren’t free to move from industry to industry Prices don’t reflect the cost of production

5. Inadequate Competition: –Larger but fewer firms results in: Waste of resources Higher prices and reduced output Political power Inadequate Information: –Information on jobs and prices is hard to find. –How would this hurt the market? Resource Immobility: –Land, labor, capital don’t easily move from one market to another. –Workers don’t want to move.

6. Externalities Unintended side effect that either benefits or harms a third party not involved in the activity that cause it. Seen as a market failure because their cost is not reflected in the market price.

7. Negative Externality: –Harm, cost or inconvenience suffered by a 3 rd party because of actions by others. –Example: Airport built, homes around have to deal with the noise. Positive Externality: –Benefit received by third party even though they have nothing to do with it. –Example: Because of the new airport restaurants sell more meals.

8. Pg 183 #2,3,4,5 Provide Examples. Government solutions to market failures. What are anti-trust laws? –Laws that protect against monopolies and protect competition. Try to prevent market failures caused by Inadequate Competition. –Prevent Price Fixing and Price Discrimination. What is Public Disclosure? –Requirement of businesses to reveal info to the public. Prevents market failure caused by Inadequate Information.

9. Pop Quiz 2 1.A market with one seller. 2.A market with 2-3 sellers and lots of buyers is an example of _____________. 3.What market structure would promote both product variety and low prices? 4.Anti-trust laws are designed to prevent which of the four market types. 5.When a business makes a third party pay the cost of production it is called an _____.

10. 6. Public Disclosure prevents which of the four reasons why markets fail? 7. A seller who sales their product to one retailer for less than others is practicing _________. Ant-trust laws try to prevent this so there is an even playing field. a. Price discrimination b. market fixing c. what? 8.) Which market structure would be most likely to fail? 9.) An example of non-price competition would be: a. Giveaways b. Sponsorships c. Advertisements d. all of the above 10.) List three of the four types of monopolies.

11. Movie: Wal-mart 1.) List and explain 5 interesting things from the film. 2.) What market structure is Wal-Mart an example of? Explain. 3.) What are some positive and negative externalities of Wal-Mart? 4.) Is Wal-mart good for America? Explain with economic reasoning.