When cartels divide up the market so each member has their own area and others don't intrude or compete.
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What is preferential supply?
Restricting the number of customers they supply so the product is more exclusive making prices increase.
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What is bid rigging?
Cartel members pretend to compete to win contracts but take it in turn to offer the lowest bid. This means they can charge much higher prices.
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Why might cartels restrict output?
To restrict supply to prices increase
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What is tacit collusion?
When a competing firm appears to follow a similar strategy to reach the same aim, such as avoiding price cutting, but without meeting or having an agreement.
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What is explicit collusion?
Occurs when there is a meeting or agreement to follow a joint strategy like price fixing
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What are restictive practices?
Any action that a business migh use to restrict competition
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What can a business do to restrict competition?
Force retailers not to stock a competitiors products, refusing to supply retailers who discount products, full line forcing, exclusive dealing, resale price maintenance.
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What is full line forcing?
When retailer are forces to stock a full range of a suppliers goods rather than just the best selling ones.
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What is exclusive dealing?
When a supplier requires or induces a customer to deal only or mostly in certian products
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What is resale price maintenance?
Suppliers force retailers not to discount prices
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What is the impact of restrictive practices on consumers?
Disposable income will reduce and so will standard of living, may not have the same range of choice, products may lack innovation
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What are the consuqences of restrictive practices of businesses?
Increase profitability, aren't as efficient, weakens competitiveness in international markets
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What is a natural monopoly?
Occurs when the most efficient scale of production is a monopoly because more than one producer would involve wasteful duplication of resources.
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Which industries are natural monopolies?
Railways, power distribution, water supply
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What are the problems with natural monopolies?
Prices may rise, innovation may be no-existent,
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What is a regulatory body?
A public authority or regulatory body responsible for exercising control over a sphere of business activity. There main priority is protecting consumers.
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Other cards in this set
Card 2
Front
What do consumers want?
Back
Low prices, high quality, innovative goods and good service.
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