Econ 4.1-4.4

Imperfectly Competitive

A market that does not meet the requirements for perfect competition

Market Power

Refers to a firm's ability to influence the price it charges for a good/service

Monopolist

A firm that is the only producer of a good that has no close subsitutes

monolpoly

An industry with only one firm

Oligopoly

Is an industry with only a small number of firms

Oligopolist

a producer in an oligopoly

Concentration Ratios

measure the percentage of industry sales accounted for by the "X" largest firms, for example the four-firm concentration ratio or the eight-firm concentration ratio

monopolistic competition

a market structure in which there are many competing firms, each firm sells a differentiated product, and there is free entry into and exit from the industry in the long run

product differentiation

Is an attempt by a firm to convince buyers that its product is different from the products of other firms in the industry

Barrier to entry

To sustain economic profit, a monopolist must be protected by a — something that prevents other firms from entering the industry

Natural Monopoly

Exists when economies of scale provide a large cost advantage to a single firm that produces all of an industry's output

Patent

Gives the owner a temporary monopoly in the use or sale of an invention

Copyright

Gives the copyright holder for a literary or artistic work the sole right to profit from that work for a specified period of time

Demand curve of a perfectly competitive firm

Horizontal (perfectly elastic)

Demand curve of a monopolist

downward sloping

A quantity effect

The sale of one more unit increases total revenue by the price at which the unit is sold

A price effect

In order to sell that last unit, the monopolist must cut the market price on all units sold. This decreases total revenue

The monopolist's profit

(P-ATC) x Q

Public ownership

the good is supplied by the government or by a firm owned by the government

Price regulation

limits the price that a monopolist is allowed to charge

Unregulated/regulated monopoly

Single-price monopolist

charges all consumers the same price

Price Discrimination

Sellers engage in this when they charge different prices to different consumers for the same good

Perfect price discrimination

takes place when a monopolist charges each consumer his or her willingness to pay—the maximum that the consumer is willing to pay

Techniques for price discrimination

1. advance purchase restrictions

2. Volume Discounts

3. 2-part tariffs

2. volume discounts

3. two-part tariffs

Profitable/Unprofitable firm

Excess capacity

Firms in a monopolistically competitive industry produce less than the output at which average total cost is minimized.

Brand name

a name owned by a particular firm that distinguishes its products from those of other firms