Monopoly and Market Structures Analysis

Demand Schedule

Table showing price, quantity, total cost.

Max Profit Condition

Occurs where marginal revenue equals marginal cost.

Perfect Price Discrimination

Monopolist charges each consumer their maximum willingness to pay.

Social Waste

Inefficiency due to monopolistic practices.

Output Level Comparison

Monopolists produce less than perfect competition.

Consumer Surplus

Eliminated under perfect price discrimination.

Total Revenue Curve

Graph showing total revenue at different output levels.

Economic Profit

Profit when total revenue exceeds total cost.

Deadweight Loss

Loss of economic efficiency due to monopoly pricing.

Market Structure Characteristics

Includes barriers to entry, number of sellers.

Allocative Efficiency

Marginal price equals marginal benefit.

Short-Run Adjustment

Illustrated by marginal cost curve.

Shutdown Point

Price where firm incurs losses equal to fixed costs.

Marginal Revenue Definition

Change in total revenue from selling one more unit.

Profit Maximizing Output

Where vertical distance between TR and TC is greatest.

Minimizing Losses

Firm should shut down or cover fixed costs.

Long-Run Demand Increase

Leads to more firms entering the industry.

Oligopoly Characteristics

Few firms, interdependent pricing, barriers to entry.

Monopolist Pricing

Price set above marginal cost.

Price Elasticity of Demand

Measure of responsiveness of quantity demanded to price change.

Marginal Cost Curve

Shows cost of producing one more unit.

Short Run vs Long Run

Short run has fixed resources; long run does not.

Game Theory

Strategy analysis for firms in oligopoly.

Sunk Cost

Fixed costs that cannot be recovered.

Marginal Profit

Additional profit from selling one more unit.

Patents

Encourage innovation by protecting inventors' rights.

Market Power

Ability to set prices above marginal cost.

Differentiated Products

Products that are not identical among firms.

Price Takers

Perfectly competitive firms with no market power.

Total Revenue Equation

Total revenue equals price times quantity.

Average Revenue

Total revenue divided by quantity sold.

Long-Run Industry Supply Curve

Horizontal under constant costs in perfect competition.

Advertising Costs

Incurred by monopolists to maintain market power.

Monopolistic Competition

Many firms selling differentiated products.

Oligopoly Pricing

Higher prices due to limited competition.

Marginal Revenue Curve

Decreases as output increases for monopolists.

Total Cost Curve

Graph showing total costs at different output levels.

Economic Efficiency

Achieved when resources are allocated optimally.

Price Discrimination

Charging different prices for the same product.

Perfect Competition

Market structure with many buyers and sellers.

Market Structure Types

Includes perfect competition, monopoly, oligopoly.

Demand Curve

Graph showing relationship between price and quantity demanded.

Profit Maximization Condition

Occurs where MR equals MC.

Long Run Equilibrium

Occurs when firms earn normal profits.

Short Run Equilibrium

Temporary state where firms may earn supernormal profits.