Chapter 10: Monopoly Flashcards
Market Power
Ones ability to alter the market price of a good or service
Monopoly
To control the entire market supply of a good or service
Profit-Maximization Rule
A firms rate-of-output should be where marginal revenue equals marginal cost
Marginal Revenue (MR)
A change in total revenue based on a one-unit increase in quantity sold
Barriers to Entry
Factors making entering into a market very difficult
Economies of Scale
A reduction in minimum average costs, when scale of production increase
Production Decision
Deciding weather a firm should produce a product considering existing plants and equipment.
Average Total Cost (ATC) Formula
Total Cost / Quantity Produced
Marginal Cost Pricing
Supply of goods = Marginal Cost
Price Elasticity of Demand Formula
% change in quantity / % change in price
Price Discrimination
A good is priced differently to various consumers
Consumer Surplus
Max price willing to pay - price paid
Natural Monopoly
A firm able to achieve economies of scale over the entire market supply
Contestable Market
A industry that can be entered if prices of profits increase
Antitrust
Government Intervention in order to prevent abuse of market power
