Monopoly

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79 Terms

1
Profit Maximization
Setting MR equal to MC for maximum profit.
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2
Marginal Revenue (MR)
Additional revenue from selling one more unit.
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3
Demand Curve
Graph showing relationship between price and quantity.
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4
Welfare Effects
Impact of monopoly on overall economic well-being.
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5
Quantity Effect
Change in total revenue from selling one more unit.
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6
Price Effect
Decrease in total revenue from lowering price for all units.
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7
Monopolist's Demand Curve
Downward-sloping curve faced by a monopolist.
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8
Marginal Cost (MC)
Cost of producing one additional unit of output.
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9
Total Revenue
Total income from sales before costs are deducted.
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10
Higher Price
Monopolist charges more than competitive market price.
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11
Lower Quantity
Monopolist produces less than competitive market output.
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12
Positive Profit
Monopolist earns profit unlike competitive firms in long run.
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13
Inefficiency
Loss of economic efficiency in production or allocation.
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14
Constant Marginal Cost
Marginal cost remains the same regardless of output.
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15
Monopoly Price
Price set by monopolist above competitive equilibrium.
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16
Market Demand Curve
Total demand for a product at various prices.
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17
Monopolist's Production Restriction
Deliberately limiting output to maintain high prices.
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18
Figure 27-1
Illustration comparing competitive firm and monopolist behavior.
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19
Figure 27-2
Graph showing profit-maximization for a monopolist.
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20
Panel (a) Competition
No profit, total surplus equals consumer surplus.
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21
Panel (b) Monopoly
Higher price, lower quantity, deadweight loss visible.
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22
Monopolist
A single seller controlling market supply.
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23
Output (QM)
Quantity produced by the monopolist.
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24
Price (PM)
Price charged by the monopolist for QM.
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25
Profit Area
Area representing monopolist's earnings above costs.
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26
Total Surplus
Sum of consumer surplus and producer surplus.
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27
Marginal Revenue
Additional revenue from selling one more unit.
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28
Perfect Competition
Market structure with many sellers and buyers.
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29
Barriers to Entry
Features making it hard for new competitors.
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30
Economic Profits
Positive profits attracting new firms to an industry.
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31
Monopoly
Market structure with a single seller dominating.
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32
Control of a Scarce Resource
Exclusive access to essential production inputs.
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33
Technological Superiority
Advanced technology giving a firm competitive edge.
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34
Sabotaging Competitors
Actions to undermine rivals' market position.
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35
Predatory Pricing
Setting low prices to eliminate competition.
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36
Network Externalities
Value increases as more consumers use a product.
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37
Patents
Temporary exclusive rights to inventions.
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38
Copyrights
Legal protection for creative works.
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39
Natural Monopoly
Industry where one firm can supply efficiently.
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40
Increasing Returns to Scale
Cost advantages as production increases.
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41
Government Policies
Regulations to prevent monopolistic control.
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42
Price Ceiling
Maximum price set by regulators for monopolies.
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43
Regulatory Capture
Industry influence over regulatory agencies.
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44
Temporary Monopoly
Limited duration of exclusive market rights.
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45
Market Entry
Process of new firms entering an industry.
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46
Long Run
Period where firms can enter or exit markets.
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47
Monopolist Actions
Strategies to maintain market dominance.
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48
Sole Control
Exclusive ownership over a resource or market.
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49
Experience Advantage
Benefit from accumulated knowledge and skills.
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50
Lobbying
Influencing government decisions through advocacy.
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51
Infrastructure Duplication
Unnecessary replication of facilities by firms.
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52
Consumer Benefit
Advantage gained by consumers from larger firms.
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53
Investment Recovery
Recouping costs from initial investments.
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54
Barrier to Entry
Obstacles preventing new competitors from entering a market.
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55
Federal Law on Copyright
Prohibits free downloading of copyrighted music.
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56
Price Discrimination
Charging different prices to different consumers based on willingness to pay.
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57
Monopolist's Incentive
To charge high prices and restrict output.
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58
Consumer Surplus
The difference between what consumers are willing to pay and what they actually pay.
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59
Deadweight Loss
Loss of economic efficiency when equilibrium is not achieved.
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60
Perfect Price Discrimination
Charging each customer their maximum willingness to pay.
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61
Elasticity of Demand
Sensitivity of quantity demanded to price changes.
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62
Business Travelers
Customers with lower price elasticity of demand.
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63
Advance Purchase Restrictions
Lower prices for customers buying well in advance.
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64
Volume Discounts
Lower prices for purchasing larger quantities.
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65
Two-Part Tariffs
Flat fee plus per-unit fee for purchases.
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66
Sales and Outlet Stores
Regular sales events and distant outlet locations.
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67
Coupons
Discounts for consumers willing to use them.
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68
Digital Personalized Pricing
Prices adjusted based on shopper's personal information.
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69
Welfare Implications of Price Discrimination
Improves efficiency but reallocates surplus to firms.
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70
Market Power
Ability of a firm to influence prices and output.
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71
Strategies for Sabotaging Competitors
Methods used by firms to undermine rivals.
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72
Rationales Against Eliminating Barriers
Concerns about market stability and competition.
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73
Rationales For Eliminating Barriers
Encourages competition and innovation in the market.
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74
Hydroelectric Power Plant
Single provider of electricity in a remote area.
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75
Local Port Facilities
Control of supply routes by a single business owner.
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76
Consumer Benefits from Price Discrimination
Discounts for consumers who couldn't afford higher prices.
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77
Ambiguity of Price Discrimination
Mixed opinions on its overall benefits or drawbacks.
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78
Strategies for Price Discrimination
Techniques used to segment customers and maximize profits.
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79
Reallocation of Surplus
Transfer of economic benefits from consumers to firms.
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