Perfect Competition and Monopoly Overview

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22 Terms

1

Perfect Competition

Market structure with many buyers and sellers.

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2

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.

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3

Monopoly

Market structure with a single seller.

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4

Perfectly Competitive Firm

a firm is restrained from being anything

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5

Homogenous Product

Identical goods are offered by different firms.

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6

Equilibrium Price

Price where market demand equals supply.

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7

Demand Curve

Graph showing relationship between price and quantity demanded.

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8

Marginal Revenue (MR)

Additional revenue from selling one more unit.

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9

Profit Maximization Rule

Produce where MR equals Marginal Cost (MC).

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10

Patents

Legal protection preventing others from producing an invention.

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11

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.

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12

Economies of Scale

Cost advantages as production increases.

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13

Natural Monopoly

Market where one firm can supply at lower cost.

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14

Price Searcher

Seller that can influence the price of its product.

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15

Monopoly Firm

Industry, they are one and the same.

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16

Monopolist

both gains and loses by lowering price.

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17

Downward Sloping Demand Curve

Indicates higher prices lead to lower quantity demanded.

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18

Marginal Revenue Curve

shows revenue changes with output.

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19

Resource Allocative Efficiency

Optimal distribution of resources for maximum benefit.

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20

Average Total Cost (ATC)

Total cost divided by quantity produced.

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21

Perfectly Elastic Demand Curve

Horizontal demand curve at market price for firms.

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22

Ceteris Paribus

Assumption that other variables remain constant.

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