Ch. 14 Market Structure and Power Flashcards
Market Power
The extent to which a seller can charge a higher price without losing many sales to competing businesses
Perfect Competition
Markets in which all competitors sell an identical good and there are many buyers and sellers
Monopoly
When there is only one seller in the market
Oligopoly
A market with only a handful or large sellers;
Product Differentiation
Efforts by sellers to make their products differ from those of their competitors
Monopolistic Competition
A market with many small businesses competing, each selling a different product
Imperfect Competition
A market with few competitors, but not enough that market power still exists
Firm’s Demand Curve
Illustrates how the quantity that buyers demand from an individual business or firm varies as it changes the price charged
Marginal Revenue
The additional to total revenue you get from selling one more unit
Output Effect
An extra unit of output will boost revenue by the amount equal to the price sold
Discount Effect
To sell one more unit, you may have to lower the price which cuts into revenue
Change in Price x Quantity
Rational Rule for Sellers
Sell one more unit if the marginal revenue is at least as large as the marginal cost
Competition Policy
Laws and regulations designed to ensure that markets remain competitive
Collusion
An agreement by rivals to limit competition with each other
Natural Monopoly
A market in which it is cheapest for a single business to service the market
