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The flashcards below were created by user
lorilee1929
on FreezingBlue Flashcards.
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barriers to entry
any impediment that prevents new firms form entering an industry and competing on an equal basis with existing firms
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what are three types of entry barriers
- legal restrictions
- economies of scale
- control of essential resources
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What are some legal restrictions on entry into a market?
- patents and invention incentives
- licenses and other entry restrictions
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pantent
a legal barrier to entry that grans the holder the exclusive right to sell a product for 20 years from the date the patent application is filed
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innovation
the process of turning an invention into a marketable product
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monopoly demand
since a monopoly supplies the entire market, the demand for a monopolistic output is also the market demand
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average revenue
- total revenue/quantity
- demand curve is also the average revenue curve
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marginal revenue
marginal revenue is less than the price, or average revenue
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price maker
- a firm with some power to set the price because the demand curve for its output slopes downward
- a firm with market power
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what are the two ways a firm can approach profit maximization?
- total approach-supplies the quantity at which total revenue exceeds total cost by the greatest amount
- marginal approach-where marginal revenue equals marginal cost
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deadweight loss of monopoly
net loss to society when a firm with market power restricts output and increases the price
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rent seeking
activities undertaken by individuals or firms to influence public policy in a way that increases their incomes
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price discrimination
increasing profit by charging different groups of consumers different prices for the same product
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what are the conditions for price discrimination
- the firm is a price maker
- there must be at least two groups of consumers for the product
- the firm must be able to charge each group a different price for the same product at little cost
- the firm must be able to prevent those who pay the lower price from reselling the product to those who pay the higher price
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perfectly discriminating monopolist
- a monopolist who charges a different price for each unit sold
- also called a monopolist's dream
- is able to convert every dollar of consumer surplus into economic profit
- consumers just break even because total benefit equals total cost
- example cell phone service
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