Chapter 7 Section 4 Price War When competitors
![Chapter 7 Section 4 Chapter 7 Section 4](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-1.jpg)
![-Price War – When competitors cut their prices very low to win business. -This -Price War – When competitors cut their prices very low to win business. -This](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-2.jpg)
![Illegal Business Activities: Collusion – Any agreement among firms or business leaders to do Illegal Business Activities: Collusion – Any agreement among firms or business leaders to do](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-3.jpg)
![-Cartel – An agreement by formal organization of producers to coordinate prices and production. -Cartel – An agreement by formal organization of producers to coordinate prices and production.](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-4.jpg)
![• Predatory pricing- Selling a product below cost in order to drive competitors • Predatory pricing- Selling a product below cost in order to drive competitors](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-5.jpg)
![• Merger- Combination of two or more companies into a single firm • Merger- Combination of two or more companies into a single firm](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-6.jpg)
![• Monopolies are less fair than competitive markets. • Monopolies and oligopolies can • Monopolies are less fair than competitive markets. • Monopolies and oligopolies can](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-7.jpg)
![• Economists are skeptical about most claims of predatory pricing because the predator • Economists are skeptical about most claims of predatory pricing because the predator](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-8.jpg)
![• The government has a number of policies that keep firms from controlling • The government has a number of policies that keep firms from controlling](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-9.jpg)
![• In 1890, Congress passed the Sherman Antitrust Act, which outlawed mergers and • In 1890, Congress passed the Sherman Antitrust Act, which outlawed mergers and](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-10.jpg)
![• Some firms require a costumer who buys one product to buy other • Some firms require a costumer who buys one product to buy other](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-11.jpg)
![• In 1997, The Department of Justice accused Microsoft of using a monopoly • In 1997, The Department of Justice accused Microsoft of using a monopoly](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-12.jpg)
![• In 1999, the federal judge ruled that Microsoft was a monopoly and • In 1999, the federal judge ruled that Microsoft was a monopoly and](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-13.jpg)
![• The Government often blocks rising monopolies by preventing company mergers that might • The Government often blocks rising monopolies by preventing company mergers that might](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-14.jpg)
![• Deregulation is the removal of some government controls over a market. • • Deregulation is the removal of some government controls over a market. •](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-15.jpg)
![• Depending on the degree of deregulation, the governments action allowed –or forced- • Depending on the degree of deregulation, the governments action allowed –or forced-](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-16.jpg)
![What is the purpose of anti-trust laws? What is the purpose of anti-trust laws?](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-17.jpg)
![Under what conditions will the government approve a merger? Under what conditions will the government approve a merger?](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-18.jpg)
![How does predatory pricing hurt competition? How does predatory pricing hurt competition?](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-19.jpg)
![How does deregulation change the banking and air travel industries? How does deregulation change the banking and air travel industries?](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-20.jpg)
![Why did government once regulate the banking, trucking, and airline industries? Why did government once regulate the banking, trucking, and airline industries?](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-21.jpg)
![Why does the government feel it has to right to intervene in markets to Why does the government feel it has to right to intervene in markets to](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-22.jpg)
![What is a trust? What is a trust?](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-23.jpg)
![How are trust and cartels similar? How are trust and cartels similar?](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-24.jpg)
![What are some examples of the government using antitrust legislation to breakup existing monopolies? What are some examples of the government using antitrust legislation to breakup existing monopolies?](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-25.jpg)
![What strengthens government control ? What strengthens government control ?](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-26.jpg)
- Slides: 26
![Chapter 7 Section 4 Chapter 7 Section 4](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-1.jpg)
Chapter 7 Section 4
![Price War When competitors cut their prices very low to win business This -Price War – When competitors cut their prices very low to win business. -This](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-2.jpg)
-Price War – When competitors cut their prices very low to win business. -This is legal only as it is done for a short period of time (i. e. 1 day) and thus does not hurt consumers or decrease competition
![Illegal Business Activities Collusion Any agreement among firms or business leaders to do Illegal Business Activities: Collusion – Any agreement among firms or business leaders to do](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-3.jpg)
Illegal Business Activities: Collusion – Any agreement among firms or business leaders to do anything illegal such to set prices and production levels. -Price Fixing – An agreement among firms to sell at the same or very similar prices.
![Cartel An agreement by formal organization of producers to coordinate prices and production -Cartel – An agreement by formal organization of producers to coordinate prices and production.](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-4.jpg)
-Cartel – An agreement by formal organization of producers to coordinate prices and production. -Cartels can only work if every member keeps to its agreed output levels and no more , when this happens price will fall and firms will lose profit.
![Predatory pricing Selling a product below cost in order to drive competitors • Predatory pricing- Selling a product below cost in order to drive competitors](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-5.jpg)
• Predatory pricing- Selling a product below cost in order to drive competitors out of the market • Antitrust Laws- Laws that encourage competition in the marketplace • Trust- Like a cartel, an illegal grouping of companies that discourage competition
![Merger Combination of two or more companies into a single firm • Merger- Combination of two or more companies into a single firm](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-6.jpg)
• Merger- Combination of two or more companies into a single firm
![Monopolies are less fair than competitive markets Monopolies and oligopolies can • Monopolies are less fair than competitive markets. • Monopolies and oligopolies can](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-7.jpg)
• Monopolies are less fair than competitive markets. • Monopolies and oligopolies can sometimes be bad for the consumers and economy as a whole • Markets dominated by a few large firms generally have higher prices and lower outputs then markets with many sellers.
![Economists are skeptical about most claims of predatory pricing because the predator • Economists are skeptical about most claims of predatory pricing because the predator](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-8.jpg)
• Economists are skeptical about most claims of predatory pricing because the predator looses money each time it drives an endless series of rivals out of business
![The government has a number of policies that keep firms from controlling • The government has a number of policies that keep firms from controlling](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-9.jpg)
• The government has a number of policies that keep firms from controlling the price and supply of important goods • If a firm controls a large share of a market the Federal Trade Commission and Department of Justices Antitrust Division will watch the firm closely
![In 1890 Congress passed the Sherman Antitrust Act which outlawed mergers and • In 1890, Congress passed the Sherman Antitrust Act, which outlawed mergers and](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-10.jpg)
• In 1890, Congress passed the Sherman Antitrust Act, which outlawed mergers and monopolies that limit trade between states • Despite the antitrust laws, companies have used many strategies to gain control over their market
![Some firms require a costumer who buys one product to buy other • Some firms require a costumer who buys one product to buy other](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-11.jpg)
• Some firms require a costumer who buys one product to buy other products from the same company. • The government has the power to regulate these practices if they give too much power to a company that already has few competitors.
![In 1997 The Department of Justice accused Microsoft of using a monopoly • In 1997, The Department of Justice accused Microsoft of using a monopoly](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-12.jpg)
• In 1997, The Department of Justice accused Microsoft of using a monopoly in operating systems. • They were also accused of predatory pricing because they gave away their browser for free, which could ruin Netscape, the other browser company.
![In 1999 the federal judge ruled that Microsoft was a monopoly and • In 1999, the federal judge ruled that Microsoft was a monopoly and](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-13.jpg)
• In 1999, the federal judge ruled that Microsoft was a monopoly and started working to reduce the companies power.
![The Government often blocks rising monopolies by preventing company mergers that might • The Government often blocks rising monopolies by preventing company mergers that might](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-14.jpg)
• The Government often blocks rising monopolies by preventing company mergers that might reduce competition and lead to higher prices.
![Deregulation is the removal of some government controls over a market • Deregulation is the removal of some government controls over a market. •](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-15.jpg)
• Deregulation is the removal of some government controls over a market. • In the late 1970’s-1980’s Congress passed laws to deregulate several industries. • Over several years, the government deregulated the airlines, trucking, banking, railroad, natural gas, and television broadcasting industries.
![Depending on the degree of deregulation the governments action allowed or forced • Depending on the degree of deregulation, the governments action allowed –or forced-](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-16.jpg)
• Depending on the degree of deregulation, the governments action allowed –or forced- firms in some industries to compete in markets by eliminating many entry barriers and price controls. • Deregulation weakens government control
![What is the purpose of antitrust laws What is the purpose of anti-trust laws?](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-17.jpg)
What is the purpose of anti-trust laws?
![Under what conditions will the government approve a merger Under what conditions will the government approve a merger?](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-18.jpg)
Under what conditions will the government approve a merger?
![How does predatory pricing hurt competition How does predatory pricing hurt competition?](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-19.jpg)
How does predatory pricing hurt competition?
![How does deregulation change the banking and air travel industries How does deregulation change the banking and air travel industries?](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-20.jpg)
How does deregulation change the banking and air travel industries?
![Why did government once regulate the banking trucking and airline industries Why did government once regulate the banking, trucking, and airline industries?](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-21.jpg)
Why did government once regulate the banking, trucking, and airline industries?
![Why does the government feel it has to right to intervene in markets to Why does the government feel it has to right to intervene in markets to](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-22.jpg)
Why does the government feel it has to right to intervene in markets to promote competition?
![What is a trust What is a trust?](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-23.jpg)
What is a trust?
![How are trust and cartels similar How are trust and cartels similar?](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-24.jpg)
How are trust and cartels similar?
![What are some examples of the government using antitrust legislation to breakup existing monopolies What are some examples of the government using antitrust legislation to breakup existing monopolies?](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-25.jpg)
What are some examples of the government using antitrust legislation to breakup existing monopolies?
![What strengthens government control What strengthens government control ?](https://slidetodoc.com/presentation_image_h/200e061894344f7472e911dbcfbe0d3b/image-26.jpg)
What strengthens government control ?
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