Chapter 23 - Monopoly Flashcards
Monopoly
A theory of market structure based on three assumptions: there is one seller, it sells a product that has no close substitutes, and the barriers to entry are extremely high.
Public Franchise
A firm’s government granted right that permits the firm to provide a particular good or service and that excludes all others from doing so
Natural Monopoly
The condition in which economies of scale are so pronounced that only one firm can survive
Price Searcher
A seller that has the ability to control, to some degree, the price of the product it sells
Deadweight Loss of Monopoly
The net value (the value of buyers over and above the cost to suppliers) of the difference between the competitive quantity of output (where P=MC) and the monopoly quantity of output (where P>MC); the loss due to not producing the competitive quantity of output
Rent Seeking
Actions of individuals and groups that spend resources to influence public policy in the hope of redistributing (transferring) income to themselves from others
X-inefficiency
The increase in costs, due to the organizational slack in a monopoly, resulting from the absence of competitive pressure to push cost down to their lowest possible level
Price Discrimination
A price structure in which the seller charges different prices for the product that sells and the price differences do not reflect cost differences
Perfect Price Discrimination
A price structure in which the seller charges the highest price that each consumer is willing to pay for the product rather than go without it
Second-Degree Price Discrimination
A price structure in which the seller charges a uniform price per unit for one specific quantity, a lower price for an additional quantity, and so on
Third-Degree Price discrimination
A price structure in which the seller charges different prices in different markets or charges different prices to various segments of the buying population
Arbitrage
Buying a good at a low price and selling it for a higher price
