Monopolistic Competition

ECON 1030 Unit 10

Productive Efficiency

Producing output at the lowest possible average total cost of production; using the fewest resources possible to produce a good or service.

Allocative Efficiency

Producing the goods and services that are most wanted by consumers in such a way that their marginal benefit equals their marginal cost.

Deadweight Loss

The value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium.

Excess Capacity

The underutilization of resources that occurs when the quantity of output a firm chooses to produce is less than the quantity that minimizes average total cost

Monopolistic Competition

A market structure characterized by a relatively large number of sellers producing a differentiated product, for which they have some control over the price they charge, in a market with relatively easy market entry and exit.

Product Differentiation

The strategy of distinguishing one firm’s product from the competing products of other firms.

Demand Curve

A graphical representation of the relationship between the price of a good, service, or resource and the quantities consumers are willing and able to buy over a fixed time period, all else held constant.

Marginal Revenue (MR)

The change in a firm’s total revenue that results from a one-unit change in output produced and sold.