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19 Cards in this Set
- Front
- Back
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Monopoly |
A market structure in which there is a single supplier of a product. |
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Monopoly firm (monopolist) |
A single supplier of a product for which there is no close substitute. May be large or small, but whatever its size, it must be the only supplier of the product |
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Barrier to entry |
Anything that artificially prevents the entry of firms into an industry in which existing firms are earning positive economic profits. The three classes include natural barriers (economies of scale), actions on the part of firms that create barriers to entry, and governmentally created barriers |
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Natural monopoly |
An industry in which economies of scale are so great that a single firm can produce the product at a lower average total cost than would be possible if more than one firm produced the product. |
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Local monopoly |
A firm that has a monopoly within a specific geographic area |
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Regulated monopoly |
A monopoly whose prices and production rates are controlled by a government entity; control the prices charged and services offered by a natural monopoly |
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Monopoly power |
Market power, the ability to set prices rather than just be a price taker. Exists whenever the demand curve facing the producer is downward sloping |
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Price maker |
A firm that has monopoly power; able to affect the product or resource price by changing the amount it sells (or buys) |
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Monopolization |
Refers to the attempt by a firm to take over a market- attempt to become only supplier of a good or service |
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Price discrimination |
Selling of a product to different buyers at different prices when the price differences are not justified by differences in cost |
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Perfect price discrimination |
A firm with market power could collect the entire consumer surplus if it could charge each customer exactly the price the customer was willing and able to pay |
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Deadweight loss |
Reduction in consumer and producer surplus that is not transferred to the monopoly firm or to anyone else; the reduction of consumer surplus without a corresponding increase in profit when a perfectly competitive firm is monopolized |
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Fair-return price |
The price of a product that enables its producer to obtain a normal profit and that is equal to the average total cost of producing it |
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Licensing |
Government limits entry into an industry so that monopolistic firms can generate profit |
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Network Effects |
Increases in the value of a product to each user, including existing users, as the total number of users rises |
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Patent |
An exclusive right given to investors to produce and sell a new product or machine for 20 years from the time of patent application |
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Rent-seeking behavior |
The actions by persons, firms, or unions to gain special benefits from government at the taxpayers' or someone else's expense |
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Simultaneous consumption |
Product can satisfy a large number of people at the same time because of singular production need and low marginal cost of distribution; lowered ATC as number of consumers increases |
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Socially optimal price |
The price of a product that results in the most efficient allocation of an economy's resources and that is equal to the marginal cost of the product |
