Monopoly and Competition Policy

These flashcards cover key definitions and concepts related to monopoly and competition policy, including types of monopolies, barriers to entry, economic effects, and relevant laws.

Monopoly

A firm that is the only seller of a good or service that does not have a close substitute.

Barriers to Entry

Obstacles that prevent new competitors from easily entering an industry or area of business.

Patent

The exclusive right to produce a product for a period of 20 years from the date the patent is filed with the government.

Copyright

A government-granted exclusive right to produce and sell a creation such as books, films, and music.

Public Franchise

A government designation that a firm is the only legal provider of a good or service.

Network Externalities

A situation in which the usefulness of a product increases with the number of consumers who use it.

Natural Monopoly

A situation in which economies of scale are so large that one firm can supply the entire market at a lower average total cost than multiple firms.

Deadweight Loss

A reduction in economic efficiency caused by a monopoly, reflecting lost consumer and producer surplus.

Collusion

An agreement among firms to charge the same price or otherwise not to compete.

Market Power

The ability of a firm to charge a price greater than marginal cost.

Antitrust Laws

Legislation aimed at eliminating collusion and promoting competition among firms.

Economic Surplus

The sum of consumer surplus and producer surplus, reflecting the total benefit to society from production.

Producer Surplus

The net benefit to producers from selling a good or service, calculated as the difference between the amount received and the minimum amount they were willing to accept.

Consumer Surplus

The net benefit received by consumers from purchasing a good or service, calculated as the difference between what consumers are willing to pay and what they actually pay.