CH 16 Study Notes

Monopoly

A market with only one seller.

Firm Demand Curve

A graph showing how much a single company will sell at different prices.

Market Demand Curve

A graph showing how much of a product all buyers in a market will buy at different prices.

Perfect Competition

A market where there are many small sellers and buyers, all selling the same product, and no one can control the price.

Price Takers

People or companies who have to accept the market price for a product.

Perfectly Elastic Firm Demand Curve (Perfect Competition)

In perfect competition, a company can sell any amount it wants at the current market price.

Market Power

The ability of a company to raise its prices without losing too many customers.

Oligopoly

A market with a small number of big companies that influence each other's decisions.

Monopolistic Competition

A market with many companies selling similar but slightly different products, making it easy for new companies to join.

Product Differentiation

Making a product different from competitors' products, either by features or how it's advertised.

Marginal Revenue (MR)

The extra money a company makes from selling just one more item.

Output Effect (MR)

The money gained from selling one more item.

Discount Effect (MR)

The money lost because you have to lower the price on all previously sold items to sell just one more.

Profit Maximization Principle

Companies make the most profit when they produce until the extra money from one more item (MR) equals the extra cost of making it (MC).

Profit-Maximizing Output

The quantity of goods a company should produce to make the most profit, found where $MR = MC$.

Deadweight Loss

Lost economic benefits to society because companies with market power don't produce enough goods.

Antitrust Laws

Government laws designed to prevent monopolies and promote competition.

Natural Monopoly

A market where it's most efficient for only one company to provide a service, like utilities, because of very high upfront costs.

Monopoly Resources

When one company owns all of a key resource needed to make a product.

Government Regulation (Barriers)

Government rules, like patents, that prevent other companies from entering a market.

Economies of Scale (Barriers)

When larger companies can produce goods at a lower average cost than smaller ones.

Price Discrimination

Charging different prices to different customers for the exact same product.

Perfect Price Discrimination

Charging every single customer the highest price they are willing to pay for a product.