4 - concentrated markets: theory of monopoly Flashcards
barriers to entry
obstacles that stop new firms entering a market
x-inefficient
the gap between the actual and lowest possible cost (not reducing the costs to their lowest level)
patent laws
a grant of temporary monopoly rights over a new product
copyright
ownership of rights, giving redress at law for copying a third party, e.g a book
nationalised
taking a firm/industry into public ownership - ownership by the state
limit pricing
setting a price so low that other firms will not enter the industry
sunk costs
irretrievable costs that occur when a firm exits an industry
legal monopoly
a firm with 25% or more market share
product differentiation
a way of distinguishing a product from that of competitors
marginal cost pricing
setting the price at the level of marginal cost
average cost pricing
setting the price at the level of average cost
dead-weight loss
reduction in consumer and producer surplus when output is restricted to less than the optimum level
price discrimination
where an identical good/service is sold to different customers at different prices for reasons not associated with costs
first degree price discrimination
when the discriminating firm can charge a separate price to each individual customer
second degree price discrimination
when the discriminating firm can charge a separate price to different customer groups
