Economics 11e, Ch. 9

Flashcards on Monopoly and Price Discrimination

Monopoly

Sole supplier of a product with no close substitutes

Barrier to entry

Any impediment that prevents new firms from entering an industry and competing on an equal basis with existing firms

Patents

Grants the holder the exclusive right to sell a product for 20 years from the date the patent application is filed

Innovation

The process of turning an invention into a marketable product

Licenses and other entry restrictions

Government awarding an individual firm the exclusive right to supply a particular good or service

Economies of scale

Downward-sloping long-run average cost curve

Natural monopoly

One firm can supply market demand at a lower average cost per unit than could two or more firms, each producing less

Price maker

Firm with some power to set the price because the demand curve for its output slopes downward

Price maker

Firm with market power

Deadweight loss of monopoly

Net loss to society when a firm with market power restricts output and increases the price

Price discrimination

Increasing profit by charging different groups of consumers different prices for the same product

Perfect price discrimination

Charging a different price for each unit sold