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Government Intervention in Markets: Promoting Fair Competition

Explore the role of government in regulating monopolies, price discrimination, and market failures to ensure fair competition and empower consumers. Learn about key acts like the Sherman Antitrust Act and the importance of disclosures for public information and consumer safety.

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Government Intervention in Markets: Promoting Fair Competition

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  1. Microeconomics

  2. Section 3 the Role of Government Terms: • Trust • 178 legally formed combinations of companies or corporations. • US government, since late 1800s, has restricted them. • “inadequate competition”

  3. Price discrimination • 179 the practice by a business of charging customers different prices for the same product. • Also illegal in US.

  4. Cease and desist order • 179 Federal Trade Commission (FTC) ruling requiring: • A company to stop an unfair business practice that reduces or limits competition among firms • Ex. Price fixing

  5. Public disclosure • 181 The requirement that businesses reveal information important to the public. • content/ingredient/safe use labels for consumers • Financial/operating information for investors • EDGAR • Banks must report to Federal Reserve System/FDIC • Credit terms • Credit reports • Truth in advertising

  6. Hwk Assessments, Class Work, to Know

  7. Assessments: Checking for Understanding • 1 • To encourage competition, • Regulate monopolies • Punish companies when they act in a manner that restrains competition

  8. 3 • Sherman Antitrust Act, 1890 • To protect trade and commerce against unlawful restraint and monopoly • Clayton Antitrust Act, 1914 • Greater government power against monopolies • Outlawed price discrimination • Federal Trade Commission Act, 1914 • Group to enforce the Clayton Act • Issue cease and desist orders • Robinson-Patman Act 1936 • Companies can no longer offer special discounts to some customers while denying them to others.

  9. 4 • To prevent market failures due to negative externalities, and • to regulate natural and government monopolies.

  10. 5 • It promotes competition • Enables consumers to make informed decisions

  11. 6 • People carry on economic affairs freely but are subject to some government regulation.

  12. WE Image, p. 179 • Question • To ensure fair methods of competition in interstate commerce.

  13. WE Image, p. 180 • Questions • Answers will vary. • Most likely: • FDA, food/drug quality/safety • FTC, fair prices • NLRB, worker rights • EEOC, worker rights • EPA, health/environment safety • OSHA, worker safety • CPSC, consumer safety • Which would be involved in an automobile recall? • CPSC

  14. WE Image, p. 181 • Question • 40 cents • What will the producer probably do? • Pass the cost on to the middlemen, who will sell eventually to the consumer to get some of the money back.

  15. WE Image, p. 182 • Question • Promote competition • Enable consumers to make better decisions

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