Imperfect Competition Overview

These flashcards cover key terms and concepts related to monopolistic competition, oligopoly, pure monopoly, and the economic principles governing these market structures.

Monopolistic Competition

A market structure characterized by a relatively large number of firms, product differentiation, and difficult entry and exit.

Elastic Demand

A demand curve where quantity demanded is highly responsive to changes in price.

Economic Profit

Profit that exceeds the normal profit; occurs when total revenue is greater than total costs.

Allocative Efficiency

A situation where resources are distributed in a way that maximizes the total benefit received by all members of society.

Oligopoly

A market structure characterized by a few large firms that dominate the market and may engage in collusion.

Collusion

An agreement among firms in an industry to restrict competition by fixing prices or dividing the market.

Pure Monopoly

A market structure where a single seller controls the entire supply of a product or service.

Average Total Cost (ATC)

The total cost per unit of output, calculated by dividing total costs by the quantity produced.

Marginal Revenue (MR)

The additional revenue gained from selling one more unit of a good or service.

Barrier to Entry

Obstacles that prevent new competitors from easily entering an industry.

Price Discrimination

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

Market Power

The ability of a firm to influence the price of its product or service in the market.

Downsloping Demand Curve

A demand curve that slopes downwards, indicating that higher prices lead to lower quantities demanded.

Profit Maximization

A strategy that firms use to determine the most profitable level of production.

Standard Product

A product that is identical to others in the market, commonly found in perfect competition.

Marginal Cost (MC)

The cost of producing one more unit of a good or service.

X-Inefficiency

A situation where a firm does not minimize its costs due to lack of competition.