Ch. 14 - Market Structure & Degrees of Market Power Flashcards
What is market power?
The extent to which a seller can charge a higher price without losing many sales to competing businesses
What is perfect competition?
Markets in which 1) all businesses in an industry sell an identical good; and 2) there are many sellers and many buyers, each of whom is small relative to size of the market
What is a monopoly?
Where there is only one seller in the market
What is a oligopoly?
A market with only a handful of large sellers
What is monopolistic competition?
A market with many smaller businesses competing, each selling differenciated products
What is imperfect competition?
When you face some competitors and/or you sell products that differ at least a little from your competitors. Monopolistic competition & oligopoly are examples
What is a firm’s demand curve?
Illustrates how the quantity that buyers demand from an individual firm or business varies as it changes the price it charges
What is marginal revenue?
The addition to total revenue you got from selling one more unit
What is the rational rule for sellers?
Sell one more item if the marginal revenue is creater than or equal to the marginal cost
What is competition policy?
Laws & regulations designed to ensure that markets remain competitive (also called antitrust policy)
What is collusion?
An agreement to limit competition; an agreement by rivals to not compete wwith each other, but to all charge high prices instead
What is a natural monopoly?
A market in which it is cheapest for a single business to service the market
