ECON 402 Lecture Notes - Lecture 15: Horizontal Integration, Deadweight Loss, Market Power
Course CodeECON 402
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1.1 A monopoly is a firm that is the only seller of a good or service that does not have a close substitute.
2.2 The federal government grants patents, because they encourage innovation and creativity, since
without them, firms would not be able to substantially profit from their endeavors
4.2 Firms with market power create deadweight loss because they charge a price that is greater than
marginal cost to maximize profits. The total deadweight loss from market power for the economy is small.
5.1 Antitrust laws are intended to make illegal any attempts to form a monopoly or to collude.
The Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice are in charge
of enforcing them.
5.2A horizontal merger is a merger between firms in the same industry, while a vertical merger is a
merger between firms at different stages of the production of a good. Horizontal mergers are more
likely to increase market power.
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