Monopoly Market and Price Discrimination Flashcards

Vocabulary flashcards covering the core features of a monopoly market, barriers to entry, and forms of price discrimination.

Monopoly Market

A market structure where there is only one seller or producer of a particular product or service, meaning the monopoly firm and the industry are identical.

Single Seller

A key feature of a monopoly market where one seller has full control over the price and supply of the product, while a large number of buyers ensures no single buyer can influence the price.

No Close Substitutes

A feature of a monopoly market where no close alternative products exist for the firm's product, freeing the monopoly firm from fear of competition from existing or new firms.

Price Discrimination

The practice of charging different prices to different consumers for the same product at the same time.

Personal Price Discrimination

A type of price discrimination where the seller charges different prices for the same product from different kinds of buyers, such as doctors charging less to poor patients or railways offering lower fares to senior citizens.

Place Price Discrimination

A type of price discrimination where the seller charges a different price for the same product at different places, such as charging lower per-unit rates for electricity in rural areas than in urban areas.

Use Price Discrimination

A type of price discrimination where the seller charges a different price for the same product based on its uses, such as differing per-unit electricity charges for commercial versus residential purposes.

Restrictions on Entry and Exit

Strong legal or structural barriers (such as patents, licensing, or cartels) that prevent new firms from entering and existing firms from leaving the market, enabling long-run abnormal profits and losses.

Price Maker

A status held by a monopolist who, being the sole seller in control of the market supply, can fix and dictate the price of the product.

Allocative Inefficiency

An inefficiency associated with monopoly markets, characterized by prices being higher and output being lower compared to perfectly competitive markets.