Law 5110 Study Guide - Quiz Guide: Oligopoly, Externality, Federal Cartel Office
Document Summary
The idea of competition in constitution: benefits, economic principles, perfect competition, monopoly, oligopoly, effective competition, limitations. Competition encourages companies to offer consumers goods and services at the most favorable terms. It encourages efficiency and innovation and reduces prices. To be effective, competition requires companies to act independently of each other, but subject to the competitive pressure exerted by the others. The economic principles of competition: adam smith: the invisible hand, sellers and buyers meet in the market place and create supply and demand, they have antagonistic interests that lead to more social welfare, lower/equilibrium price, efficiency (allocative/productive) The benchmark of perfect competition: simply does not exist in practice, because, products are not homogeneous, only limited number of suppliers, barriers to entry in the market, remains interesting reference point. Monopoly (no competition: only one supplier (natural/legal through patent or government license, who becomes a price setter, restricted only by the reason of consumer demand.
