Chapter 12

Price-makers

They are sellers that set the price of a good.

Market power

Relates to the ability of sellers to affect prices.

Monopoly

It’s is an industry structure in which only one seller provides a good or service that has no close substitutes.

Barriers to entry

It provide a seller with protection from potential competitors entering the market.

Legal market power

Occurs when it obtains market power through barriers to entry created not by the

firm itself but by the government.

A patent

It is the privilege granted to an individual or company by the government, which gives him or her the sole right to produce and sell a good.

A copyright

It is an exclusive right granted by the government to the creator of a literary or artistic work.

Natural market power

Occurs when a firm obtains market power through

barriers to entry created by the firm itself.

Key resources

They are materials that are essential for the production of a good or service.

Network externalities

occur when a product’s value increases as more consumers begin to use it.

A natural monopoly

It is a market in which one firm can provide a good or service at a lower cost than can two or more firms.