Lecture 5 Flashcards
1
Q
What is a monopoly?
A
- A market structure where there is only one firm in the industry
- Price inelastic
2
Q
What is monopolistic competition?
A
- A Market structure where there are many firms and freedom of entry but the firm produce differentiated products
- Meaning they have some control over the price
3
Q
What is perfect competition?
A
- There are many firms, freedom of entry into the industry, all products are identical and all firms are price takers
4
Q
What is an oligopoly?
A
- Fewer firms, restricted entry
- Products can be undifferentiated or differentiated
- Downward sloping demand curve
5
Q
For a price taker firm, what is the demand curve like?
A
- Horizontal
6
Q
Where on a graph does it show a firm maximising profits?
A
MC=MR
7
Q
What is marginal revenue?
A
is the additional revenue that will be generated by increasing product sales by one unit
8
Q
How does supernormal profit occur and what do they look like on a graph?
A
- If the average costs dip below the average revenue curve they will be making supernomal profits
9
Q
What are the advantages of perfect competition?
A
- Only normal profits = no market power for a seller
- Price=marginal costs so lower prices for consumer
