AP Microeconomics: Unit 4 - Imperfect Competition Guide Flashcards

Common barriers to market entry

control of scarce resources, legal barriers, high startup costs

Monopoly

market structure where there is only one firm producing a product

Natural Monopoly

has large fixed costs, and long economies of scale, has downward sloping ATC curve

Price Determination

occurs in specific industries as consumers pay a different price for the same good

Imperfect Price Discrimination

charging consumers different prices based on the buyer’s willingness to pay

Perfect Price Discrimination

charges all consumers the maximum they are willing to pay, no deadweight loss, produce at P=MC

Monopolistic Competition

another term for imperfect competition, and occurs when many companies offer competing products which are similar but not perfect substitutes

Oligopoly Characteristics: Interdependent

all the actions that a firm takes will affect the other firms in the oligopoly

Oligopoly Characteristics: Cartel

a group that agrees to control the price and output of a product (often form in oligopoly)

Oligopoly Characteristics: Collusion

working together to maximize profit

Game Theory: Payoff Matrix

represents the payoff to each player to show combinations of given strategies

Game Theory: Dominant Strategy

the strategy that has a better payoff regardless of what strategy the opponent chooses

Game Theory: Nash Equilibrium

point where both players can do no better than the other given the choice of their opponent

Natural Monopoly Production Point

MR=MC

Government force monopoly to set price at:

ATC=D