Market Structures Lecture Review

Comprehensive vocabulary flashcards covering Market Structures, including Perfect Competition, Monopoly, Monopolistic Competition, and Oligopoly, with their features and equilibrium conditions.

Market Structure

The characteristics and organization of a market that determine how firms compete and how prices are set, including the number of sellers, nature of products, and degree of competition.

Perfect Competition

A market where there are many buyers and sellers selling identical products, such as agricultural markets, where no single seller can influence price.

Homogeneous Products

Identical products sold in a perfectly competitive market.

Price Taker

An individual firm that accepts the market price because it has no power to affect it, typical of perfect competition.

Perfectly Elastic Demand Curve

A horizontal demand curve for a perfectly competitive firm where $AR = MR = P$.

Equilibrium of a Firm

A condition where a firm has no reason to increase or decrease output, achieved when $MR = MC$ and $MC$ is rising.

Supernormal Profit

Profit earned when Average Revenue is greater than Average Cost ($AR > AC$) or Total Revenue is greater than Total Cost.

Normal Profit

Profit earned when $AR = AC$, meaning revenue equals cost; this is the eventual state for firms in the long run under perfect competition.

Industry Equilibrium

Occurs when demand equals supply ($DD = SS$), there is no tendency for firms to enter or leave, and firms earn normal profit in the long run.

Monopoly

A market structure with only one seller and many buyers where the monopolist controls supply and acts as a price maker.

Natural Monopoly

A type of monopoly where one firm can supply a product cheaper than many firms, such as electricity distribution.

Price Maker

A firm with high market power that can influence price, such as a monopolist.

Monopoly Profit Condition

The monopolist earns supernormal profit when $AR > AC$.

Break-Even Point

The point where $TR = TC$ or $AR = AC$, resulting in zero profit where all costs are covered.

Shutdown Point

The point where $TR < TVC$ or $AR < AVC$, meaning continuing production would increase losses.

Monopolistic Competition

A market with many sellers producing similar but differentiated products, such as restaurants, hair salons, or cosmetic brands.

Product Differentiation

A feature of monopolistic competition where products are similar but not identical, such as different soap brands or soft drinks.

Selling Costs

Heavy advertising expenses used by firms in monopolistic competition.

Oligopoly

A market dominated by a few firms, characterized by interdependence, strong barriers to entry, heavy advertising, and price rigidity.

Price Rigidity

A feature of an oligopoly market where prices tend to stay at a certain level despite changes in costs or demand.