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INTRODUCTION

What if your mall had only one shoe store, one clothing store, and one store in the food court? Maybe your mall already has just one pet store, one book store, or one technology store. If that is true, what difference does it make? Does competition make a difference?

TASK

Your task is to discover the role of the Federal Trade Commission. Explain how competition encourages producers to produce more of what consumers are willing and able to buy. You will then write a pretend e-mail to MallOwnersofAmerica.com and explain why the mall where you shop needs more than one pet store, one book store, one sports store, or one technology store. Make at least three key points in your letter, using your knowledge about competition.

PROCESS

Let's start out by comparing two different malls. One mall has four clothing stores, two shoe stores, and one fast food place in the food court. The other mall has one of each of these stores. Now on a T-chart (available as a PDF file) compare these two malls. Which one probably will offer good customer service, good prices, a large selection of products, and good quality in the products on sale?

As you can see, when consumers have choices, sellers have to keep their prices low, their service up to speed, andmake sure they offer plenty of merchandise for sale-merchandise of high quality. If they don't offer the merchandise consumers want to buy, or the merchandise is poorly made, or the prices are too high, or the salespeople are rude, then consumers can go to a different store to buy what they want. 

Go to the Federal Trade Commission's "You are Here" website and click on "Go to The food Court ". Click on "Pizza, Pizza, or Pizza? " to find out how competing pizza places try to get your business.

Did Emily and Isaac choose the same pizza you would have chosen? They showed us that competition allows us to get goods and services at a lower price, with more choices, better quality and better customer service. 

Sometimes stores of the same kind get together and merge. Click on Tripple Cold Creamery and find out what happens when competition is taken away. 

The ice cream server showed us how the merger between the two ice cream stores led to lower prices. So competition works in our "flavor"-this time, cookie dough! She also warned us that when mergers take away all the competition, then they are called monopolies, and monopolies have to be approved by the Federal Trade Commission. A monopoly is a market where there are many buyers but only one seller. 

The Federal Trade Commission is an independent agency of the United States government. It is a consumer protection agency, and its job is to maintain fair and free competition. So, how does the Federal Trade Commission protect consumers? The federal government enforces antitrust laws and regulation to try to maintain fair levels of competition. 

Read the Playing by the Rules article. Based on your reading, see if you can you answer these three questions:

  1. What is a monopoly?
  2. What is price fixing?
  3. What is bid rigging?


Check your answers by comparing them with Issac and Emily's answers. For more on the legislation and history, read the history of Antitrust Laws .

These three practices (monoploy, price fixing, bid rigging) are all illegal in certain circumstances.

So you see, competition is important- so important that it is protected by a federal agency.

CONCLUSION

Write a short response to these discussion questions.


1. Why was the Federal Trade Commission needed and established?

2. What is a monopoly? If you owned a business and did such a good job that the other store in town went out of business, are you breaking the law?

3. How does competition encourage producers to produce more of what consumers want and are willing to buy?

To summarize this lesson and find out more, read these fact sheets:

ASSESSMENT ACTIVITY

Your teacher will break your class into groups and pass out a fact sheet to one person in your group. Each group member will read his or her article and then make a presentation to the group on the article's content.

Your next task will be to write a pretend e-mail to MallOwnersofAmerica.com and explain why the mall where you shop needs more than one pet store, one book store, one sports store, or one technology store.  Make at least three key points in your letter, using your knowledge of competition.

EXTENSION ACTIVITY

To find out even more about the Federal Trade Commission, read this About the FTC fact sheet .

To find more lessons on competition, check out other EconEdLink lessons for grades 3-5 and/or grades 6-8.