Ch. 12: Monopoloy Flashcards
price-maker
a seller that sets the price of a good
market power
the ability of sellers to affect prices.
monopoly
an industry structure in which only one seller provides a good or service that has no close substitutes.
Barriers to entry
obstacles that prevent potential competitors from entering the market. As such, they provide the seller protection against competition.
legal market power
occurs when a firm obtains market power through barriers to entry created not by the firm itself, but by the government.
patent
the government grants an individual or company the sole right to produce and sell a good or service.
copyright
the government grants an individual or company an exclusive right to intellectual property.
Natural market power
occurs when a firm obtains market power through barriers to entry created by the firm itself.
Key resources
are those materials that are essential for the production of a good or service.
Network externalities
occur when a product’s value increases as more consumers begin to use it.
natural monopoly
arises because the economies of scale of a single firm make it efficient to have only one provider of a good or service.
Price discrimination
occurs when firms charge different consumers different prices for the same good or service.
First-degree, or perfect price discrimination
consumers are charged the maximum price they are willing to pay
Second-degree price discrimination
onsumers are charged different prices based on characteristics of their purchase, such as the quantity they purchase
Third-degree price discrimination
different groups of consumers are charged different prices based on their own attributes (such as age, gender, or location)
