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CARTEL: A formal agreement between businesses in the same industry, usually on an international scale, to get market control, raise the market price, and otherwise act like a monopoly. A cartel tends to be unstable because the artificially high prices it sets gives each member of the cartel an incentive to "cheat" with a slightly lower price. When only one member of the cartel lowers the price, it can make oodles of profit by taking customers away from the other members. If they all cheat, the cartel falls apart. While cartels damage efficiency, they're power is often short-lived because of this cheating. Like collusion and other techniques of market control, cartels are illegal in the United States.

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Lesson 15: Aggregate Market | Unit 4: Self Correction Page: 16 of 22

Topic: Short Run <=PAGE BACK | PAGE NEXT=>

The aggregate market, which is typically at or near short-run equilibrium, is persistently motivated to seek out the long-run equilibrium.
  • This motivation comes from an imbalance in the labor market created by rigid wages, temporarily tapping into frictional and structural unemployment, and misperceptions about the real wage.
  • The imbalance is temporary. The macroeconomy will automatically move toward long-run equilibrium and full employment.
  • Wages are flexible in the long run, but rigid in the short run. This is the key to the self-correction mechanism of the aggregate market.

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VERY SHORT RUN, MICROECONOMICS

A production period of time in which at all inputs in the production process are fixed, meaning the quantity of output itself is fixed. Also termed market period, the very short run exists if the period is so short that no additional production is possible. In other words, the good has been produced, all that remains is to sell it. This is one of four production time periods used in the study of microeconomics. The other three are short run, long run, and very long run.

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Today, you are likely to spend a great deal of time at a flea market trying to buy either a 200-foot blue garden hose or a video camera with stop action features. Be on the lookout for letters from the Internal Revenue Service.
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Post WWI induced hyperinflation in German in the early 1900s raised prices by 726 million times from 1918 to 1923.
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