Describe what is happening

2 Take out spiral What will we learn today? What will we learn today? The role of government in a market economy Identify the factors that may cause the costs of government actions to outweigh the benefits Unit: Market Structures What is your greatest accomplishment? or What are you doing now that is going to help you in the future?

Assignment =Notes: 7.4 Regulation and Deregulation 3

I. Market Power Sometimes firms practice predatory pricing, or selling a product below cost to drive competitors out of the market. 4

II. Government and Competition Antitrust laws: laws that encourage competition Trust: like a cartel; an illegal grouping of companies that discourages competition The US Gov. tries to make sure businesses act appropriately. The Federal Trade Commission makes sure that firms do not force out competition. 5

In 1890, the Sherman Antitrust Act gave the federal government the power to break up monopolies. In 1982, US Gov. broke up ATT into 7 phone companies; prices did get lower. Merger: the combination of two or more companies into a single firm Sometimes the gov. tries to block mergers if they think it will not benefit the people. Generally, mergers mean less competition, and less comp. means higher prices. 6

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III. Deregulation $ Deregulation: the removal of some government regulations/control over the industry are eliminated Sometimes deregulation works great. Other times, it fails terribly. Banks were deregulated 10 years ago. Profits skyrocketed. But today, we are seeing the backlash of no regulation. California deregulated their electricity about 10 years ago. Remember when we had blackouts all the time? Deregulation was a total failure in that instance. 8

C4U What is the purpose of antitrust laws? Why does the government often not approve mergers? Why does predatory pricing hurt competition? How can deregulation help an industry? How can it hurt an industry? 9

Assignment : Chapter Crossword 10

Chapter 7 Phocabulary Create a PHOCABULARY list from the key terms on page 178. Remember WORD and Definition on right side. Picture on the left side. Do this in your spiral.