Principles of Microeconomics - Chapter 10: Monopoly Markets

A series of flashcards covering key vocabulary from the lecture on monopoly markets in microeconomics.

Monopoly

A market structure where one firm supplies a product with many buyers and faces no competition from other firms selling identical or close substitute products.

Near-Monopoly

A situation where a firm has significant market power but is not a pure monopoly due to the presence of close substitutes.

Monopoly Power

The ability of a firm to set prices above marginal cost due to a lack of competition.

Three Reasons Monopolies Arise

1) Monopolized inputs, 2) Natural monopolies, 3) Government-granted monopolies.

Natural Monopoly

Occurs when a firm can supply the entire market demand at a lower cost than multiple competing firms due to high fixed costs.

Economies of Scale

A proportionate saving in costs gained by an increased level of production, often leading to natural monopolies.

Government-Granted Monopolies

Monopolies that arise when governments provide privileges such as patents or nationalization of industries.

Marginal Revenue (MR)

The additional revenue that a firm earns by selling one more unit of a product.

Marginal Cost (MC)

The additional cost incurred by producing one more unit of a product.

Profit Maximization Condition

A firm maximizes profit by producing the quantity where marginal revenue equals marginal cost (MR=MC).

Price Discrimination

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

Perfect Price Discrimination

When a firm charges each consumer the maximum they are willing to pay, capturing all consumer surplus.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay.

Market Welfare

The sum of consumer surplus and producer surplus in a market.

Total Revenue (TR)

The total receipts from sales of a given quantity of goods or services.

Price Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in price.

Utility

The satisfaction or benefit derived from consuming goods and services.

State-Owned Enterprises (SOEs)

Firms owned and operated by the government, often not aimed solely at profit maximization.