BUS-G 202 Study Guide - Midterm Guide: Underconsumption, Marginal Cost, De Beers
Document Summary
Topic 4: global market power and antitrust issues: firms with market power: are able to restrict competition to sustain prices above marginal cost. Can exist with multiple rival firms if products are differentiated and/or markets are segmented (i. e. firms have loyal customers) Managers attempt to sustain any factors that limit competitors: strategies to restrict competition, market strategies. Guarding trade secrets, control of an essential resource, exclusive contracts & customer lock-in (soda on campus, extended cell contracts), collusion (form a cartel & act as a monopoly: non-market strategies. Patent or copyright protection, trade regulations, government licensing, government or ngo certification: profit maximization, concept of marginal revenue and marginal cost. Revenue or cost gained from producing one more unit of the product: optimal sales target selection. Profit maximizing point occurs where mc = mr (zero profit: market power pricing behavior. Given the optimal sales target, price is found as a markup over cost, where the markup factor depends on demand.
