EKN Chapter 8 Flashcards
Pure monopoly
A market structure in which one firm sells a unique product, into which entry is blocked, in which the single firm has considerable control over product price, and in which non-price competition may or may not be found.
Imperfect competition
All market structures except pure competition; includes monopoly, monopolistic competition and oligopoly.
Average revenue
Total revenue from the sale of a product divided by the quantity of the products sold; equal to the price a which the product is sold when all units of the product are sold at the same price.
Total revenue
The total number of rands received by a firm from the sale of a product; equal to the total expenditure for the product produced by the firm; equal to the quantity sold multiplied by the price at which it is sold.
Marginal revenue
The change in total revenue that results from the sale of one additional unit of a firm’s product; equal to the change in total revenue divided by the change in total revenue divided by the change in the quantity of the product sold.
Barriers to entry
Anything that artificially prevents the entry of firms into an industry.
MR=MC rule
The principle that a firm will maximize its profit by producing the output at which marginal revue and marginal cost are equal, provided product price is equal to or greater than average variable cost.
Non-price competition
Competition based on distinguishing one’s product by means of product differentiation and the advertising the distinguished product to consumers.
Allocative efficiency
Directly scarce resources to their most productive use, e.g. assessing which alternative option will produce the greatest gains for a given scenario.
Regulated monopolies
Mainly state own enterprises that are price and otherwise regulated by the government. Natural monopolies such as electricity suppliers are most of the industries that are regulated by the government.
Socially optimal price
The social optimal price for any good or service is equal to the marginal social cost of consumption.
Fair-return price
A regulated price would be one that allowed the monopoly to charge a specific price, sometimes called the fair return price.
