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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 20: Oligopoly | Unit 2: Structure Page: 9 of 24

Topic: Entry Barriers <=PAGE BACK | PAGE NEXT=>

  • The structure of most oligopoly markets is characterized by entry barriers.

  • A definition:

  • Entry barriers are natural or artificial restrictions on the movement of resources into an industry which limits the number of competitors.
  • The prime entry barriers are:

    • Start-up Cost
    • Resource Ownership
    • Decreasing Average Cost
    • Government Authorization
    • Trade Restrictions

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INCOME EFFECT

The change in quantity demanded that results because a change in the demand price of a good affects real income (that is, the purchasing power of income) even though nominal income remains the same. This is one of two reasons, or effects, underlying the law of demand and the negative slope of the market demand curve. The other is the substitution effect.

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Today, you are likely to spend a great deal of time waiting for visits from door-to-door solicitors hoping to buy either a small palm tree that will fit on your coffee table or several magazines on fashion design. Be on the lookout for fairy dust that tastes like salt.
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Cyrus McCormick not only invented the reaper for harvesting grain, he also invented the installment payment for selling his reaper.
"The majority of men meet with failure because of their lack of persistence in creating new plans to take the place of those that fail. "

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