Monopoly Concepts from Principles of Microeconomics

Flashcards covering key vocabulary and concepts related to monopolies, as outlined in principles of microeconomics.

Monopoly

A firm that is the sole seller of a product without close substitutes and has market power, acting as a price maker.

Barriers to Entry

Obstacles that prevent other firms from entering a market to compete, including monopoly resources, government regulation, and the production process.

Natural Monopoly

A type of monopoly that arises when a single firm can supply a market's entire demand at a lower cost than could two or more firms, often due to economies of scale.

Deadweight Loss

The loss of economic efficiency occurring when the equilibrium for a good or service is not achieved or is unachievable.

Price Discrimination

The business practice of selling the same good at different prices to different customers, maximizing profits by capturing consumer surplus.

Marginal Revenue (MR)

The additional revenue gained from selling one more unit of a product. For a monopolist, MR is less than the price.

Consumer Surplus

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

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive.

Antitrust Laws

Laws that promote competition and prevent monopolies, including the Sherman Antitrust Act and the Clayton Antitrust Act.

Perfect Price Discrimination

A situation in which the monopolist knows each consumer's willingness to pay and charges each a different price, leading to no deadweight loss.