Monopoly Markets and Monopolistic Competition

These flashcards cover vocabulary and concepts related to monopoly markets and monopolistic competition from the lecture notes.

Monopoly

A market structure characterized by a single firm that produces a unique product with no close substitutes.

Barriers to Entry

Obstacles that prevent new firms from entering a market, which can include government regulations, control of key resources, and economies of scale.

Price Maker

A firm that has the ability to influence the price of its product, typically seen in monopoly situations.

Marginal Revenue (MR)

The additional revenue that is generated from selling one more unit of a product.

Economic Profit

The profit that remains after all costs, including opportunity costs, have been subtracted from total revenue.

Natural Monopoly

A market situation where a single firm can supply the entire market at a lower average cost than multiple firms.

Network Externalities

A situation where the value of a product increases as more people use it.

Perfect Competition

A market structure where many firms offer identical products, leading to no control over price.

Oligopoly

A market structure characterized by a small number of firms that are interdependent regarding pricing and output decisions.

Differentiated Product

A product that is different from similar products offered by other firms, allowing some degree of market power.

Downward Sloping Demand Curve

A demand curve that shows that as the price decreases, the quantity demanded increases, typical for monopolistic competition.

Short Run Profit Maximization

The condition where a firm determines the level of output at which marginal cost equals marginal revenue, maximizing profits.

Long Run Equilibrium

A situation in which firms in a market earn zero economic profit due to free entry and exit.

Tautology of Monopoly

The situation where a monopoly firm ignores the actions of other firms due to lack of close substitutes.

Public Franchise

A government-granted exclusive right for a firm to provide a good or service.

Patent

A government license that gives the holder exclusive rights to produce a particular product for a specified period.

Economic Efficiency

A situation where resources are allocated in the most efficient way, often associated with perfect competition.

Price Discrimination

A pricing strategy where a firm charges different prices to different customers for the same product.

Total Revenue

The total receipts from sales of a product, calculated as price times quantity sold.

Average Revenue

Total revenue divided by the quantity of output sold, often equal to the price in a single-product firm.

Profit Maximizing Output (PMO)

The level of output where marginal revenue equals marginal cost, maximizing profit.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded.

Consumer Surplus

The difference between what consumers are willing to pay and what they actually pay.

Deadweight Loss (DWL)

The loss of economic efficiency that occurs when the equilibrium outcome is not achievable or not achieved.