Imperfect Markets Flashcards
What is a monopoly
A market structure in which there is only one seller of a good or service that has no close substitutes, entry into the market is completely blocked
What are the 17 characteristics of a monopoly
Number of producers
Nature of product
Economic profit
Technical superiority
Access to scarce resources
Demand curve
Production level
Market forces
Control over the price
Substitutes
Favourable circumstances
Market information
Exploitation of consumers
Market entry
Economies of scale
The geographical area
Size of the market
What is a natural monopoly
A monopoly that exists due to high development costs
What is an artificial monopoly
The barriers to entry for the monopoly are artificial like patent rights
Look at pg 34
How is short term equilibrium determined
Where marginal cost is equal to marginal revenue
Describe the long term equilibrium in a monopoly
When the monopolist makes losses in the short term, they will expand their plant size so that they can make profits
If they do not succeed they will have to close
When a monopolist makes profit in the short run, they will expand their plant size to make more profits
Look at table pg 37
Define an oligopoly
A market structure in which a few sellers dominate the market
What is a oligopoly with only 2 businesses
Duopoly
What are the 4 characteristics of a typical oligopoly
Type of product - Homogenous
Entry - New producers have free entry but it is difficult
Control over prices - Producers have considerable control
Mutual dependence - Businesses are influenced by other’s actions
What is non price competition
Oligopolists do not compete on price because it will not benefit any of them
What is collusion
Businesses in an oligopoly agreeing on prices and quantities to be produced
What are the 2 types of collusion
Cartels
Price leadership
What are cartels and what is another name for them
An organisation of oligopolistic businesses that come into existence with the aim of forming a collective monopoly - Overt Collusion
