Business Economics - Monopolies

Set of flashcards covering key concepts related to monopolies as outlined in Business Economics.

Monopoly

A market in which there is only one supplier protected from competition by barriers preventing the entry of new firms.

Close Substitutes

Products that consumers consider as alternatives to the good produced by a monopoly.

Natural Barriers to Entry

Barriers that create a natural monopoly, allowing one firm to supply the entire market at the lowest cost due to economies of scale.

Ownership Barriers to Entry

Occur when one firm owns a significant portion of a key resource, preventing competitors from entering the market.

Legal Barriers to Entry

Barriers that restrict competition and entry into a market through legal means such as public franchises, government licenses, patents, or copyrights.

Single Price Strategy

A pricing strategy where a monopoly sells each unit of output at the same price to every customer.

Price Discrimination

A strategy where a monopoly charges different prices for different units or to different customers to increase economic profit.

Marginal Revenue (MR)

The additional revenue that a monopoly earns from selling one more unit of output.

Economic Profit

The profit a firm makes after accounting for the total costs, including opportunity costs.

Perfect Price Discrimination

Occurs when a firm sells each unit of output for the highest price that each consumer is willing to pay.

Producer Surplus

The difference between what producers are willing to accept for a good and the price they actually receive.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay.