Monopolistic Competition and Oligopoly

Flashcards on key concepts related to monopolistic competition and oligopoly to aid exam preparation.

Monopolistic Competition

A market structure where many firms sell differentiated products and have some control over price.

Product Differentiation

The process of distinguishing a product or offering from others to make it more attractive to a target market.

Economic Profit

The profit above the normal profit that a firm can earn in the short run.

Excess Capacity

A situation where a firm produces at a level less than the output at which average total cost is minimized.

Advertising Signal

An action taken by a firm to indicate the quality of its product to consumers.

Oligopoly

A market structure characterized by a small number of firms whose decisions are interdependent.

Kinked Demand Curve Model

A model that suggests a firm's demand curve is kinked based on its assumptions about competitor pricing.

Dominant Firm Oligopoly

Market structure where one firm has a significant cost advantage and sets the price, while smaller firms accept that price.

Short Run Economic Loss

When a firm incurs losses if the price is less than average total cost.

Zero Economic Profit

A long-run situation in monopolistic competition where firms earn normal profits.