Perfect Competition and Monopoly Overview

Perfect Competition

Market structure with many buyers and sellers.

Price Taker

A firm/seller that cannot influence the market price of the product it sells. And it finds itself small relative to the total market supply.

Monopoly

Market structure with a single seller.

Perfectly Competitive Firm

a firm is restrained from being anything

Homogenous Product

Identical goods are offered by different firms.

Equilibrium Price

Price where market demand equals supply.

Demand Curve

Graph showing relationship between price and quantity demanded.

Marginal Revenue (MR)

Additional revenue from selling one more unit.

Profit Maximization Rule

Produce where MR equals Marginal Cost (MC).

Patents

Legal protection preventing others from producing an invention.

Public Franchise

a right that government grants to a firm and that permits the firm to provide a particular good or service and excludes all others from doing so.

Economies of Scale

Cost advantages as production increases.

Natural Monopoly

Market where one firm can supply at lower cost.

Price Searcher

Seller that can influence the price of its product.

Monopoly Firm

Industry, they are one and the same.

Monopolist

both gains and loses by lowering price.

Downward Sloping Demand Curve

Indicates higher prices lead to lower quantity demanded.

Marginal Revenue Curve

shows revenue changes with output.

Resource Allocative Efficiency

Optimal distribution of resources for maximum benefit.

Average Total Cost (ATC)

Total cost divided by quantity produced.

Perfectly Elastic Demand Curve

Horizontal demand curve at market price for firms.

Ceteris Paribus

Assumption that other variables remain constant.