Price Setter
a firm that has at least some control over the market price of its product
Pure Monopoly
the only supplier of a unique product with no close substitutes
Monopolistic Competition
an industry structure in which a large number of firms produce slightly differentiated products that are reasonably close substitutes for one another
Oligopoly
an industry structure in which a small number of large firms produce products that are either close or perfect substitutes
Market Power
a firm's ability to raise the price of a good without losing all its sales
Constant Returns of Scale
a production process is said to have constant returns to scale if, when all inputs are changed by a given proportion, output changes by the same proportion
Increasing Returns to Scale
A production process is said to have increasing returns to scale if, when all inputs are changed by a given proportion, output changes by more than that proportion; also called economies of scale
Marginal Revenue
the change in a firm's total revenue that results from a one-unit change in output
Price Discrimination
the practice of charging different prices to different buyers for goods of like grade and quality
Perfectly Discriminating Monopolist
a firm that charges each buyer exactly his or her reservation price
Price Setter
a firm with at least some latitude to set its own price
The most important strategic decision facing monopolistic competition is
how to differentiate their products from their rivals
For oligopolists entry and exit
will not push economic profit to zero in the long run
constant returns to scale
If all inputs are increased to by a fixed production, and you observe output increases by the same proportion, then the production process exhibits
Economies of Scale
if the average cost of production declines as the number of units produced increases
Natural Monoploy
results from economies of scales; increasing return of scales
For monopolists and perfectly competitive firm, the calculation of marginal cost is
the same
If a monopolist can perfectly price discriminate then they will produce
the socially optimal level of output
If a firm doubles all its input and outputs then
constant returns to scales
increasing return of scales
If all inputs are increased to by a fixed production, and you observe input increases by the same proportion, then the production process exhibits
If a firm doubles all its inputs and outputs more than doubles then it
increasing returns to scale
Antitrust Laws
designed to encourage competition by breaking up large companies and discouraging mergers between companies in the same industry
Cost-plus
is a method of regulation under which a regulated firm is permitted to charge prices that cover the explicit costs of production plus a markup to cover the opportunity costs of resources provided by the firm's owner
Cost price regulation
can lead to costly administrative squabbles about whether a regulated firm is able to recover certain costs;may give the regulated firm an incentive rather than decrease costs
For products that have extremely high fixed costs relative to their marginal costs, the average total cost of production will typically ____ as outputs increases
decrease
Profit Maximizing rule for monopolist is to choose the level of output such that
P= MC
the primary distinction between profit maximizing decision rule for a monopolist and a perfectly competitive firm is
the calculation of marginal revenue
As a monopolists profit maximizing level of output, the benefit to consumers of the last unit produced is ____ the marginal cost of producing it
greater than
Monopolists produce ____ the socially optimal level of output
less than
hurdle method of price discrimination
the practice by which a seller offers a discount to all buyers who overcome some obstacle