Market structure: perfect competition and monopoly Flashcards
Define production efficiency
occurs when firms have chosen appropriate combinations of factors of production and produce the maximum output possible from those inputs, thus producing at minimum long-run average cost
Define static Efficiency
efficiency at particular point in time
Define allocative efficiency
achieved when society is producing the appropriate bundle of goods and services relative to consumer preferences
Define dynamic efficiency
a view of efficiency that takes into account the effect of innovation and technical progress on productive and allocative efficiency in the long run.
Define Barrier to entry
a characteristic of a market that prevents new firms from readily joining the market
Define perfect competition
a form of market structure that produces allocative and productive efficiency in long-run equilibrium
Define price taker
a firm that must accept whatever price is set in the market as a whole
Describe a short-run supply curve
for a firm operating under perfect competition, the curve given by its short-run marginal cost curve above the price at which MC = SAVC; for the horizontal sum of the supply curves of the individual firms
Define Monopoly
a form of market structure in which there is only one seller of a good or service
Define natural Monopoly
monopoly that arises in an industry in which there are such substantial economies of scale that only one firm is variable
Define perfect/first-degree price discrimination
situation arising in a market whereby a monopoly firm is all e
Define third degree price discrimination
a situation in which a firm is able to charge groups of consumers a different price for the same product.
Define abitrage
a process which prices in two market segments are equalised by the purchase and resale of products by market participants
