Market Structures and Monopoly

A market structure with only one producer (monopolist).

A model describing how firms behave. It focuses on the number of firms and their level of competition.

A market structure with many firms and no single firm can affect the price.

A market structure with a few large producers who have significant influence over prices.

A market structure with many firms but each firm offers a slightly different product.

One characteristic used to define different market structures.

Charging different prices to different customers for the same product.

The overall well-being of society as related to market structure.

A single firm producing the entire output of a good or service at a lower cost than multiple firms. This occurs when economies of scale exist over the entire range of output.

The government owns and operates a natural monopoly to address potential inefficiencies and protect consumers. However, it can be prone to poor management.

Price ceilings are imposed on a natural monopolist to limit price gouging and ensure affordability. It requires careful setting to avoid shortages.

Government regulations designed to prevent or limit monopolies, typically by breaking up existing monopolies or preventing mergers.

A market where a product or service becomes more valuable as more people use it. Larger scale can benefit consumers.

A firm maintaining consistent technological advantages over competitors, creating a monopoly.

The added value of a product increases as more people use it.

Intel's dominance in microprocessors from the 1960s to 1990s is a famous example.

eBay and Facebook are examples; their value increases as more people use them.

A temporary monopoly granted to an inventor, allowing exclusive use or sale of an invention.

Exclusive right granted to the creator of a literary or artistic work to profit from it.

Barriers to entry in a market created by the government, such as patents and copyrights.

Monopolists maximize profits by producing the quantity where their marginal revenue (MR) equals marginal cost (MC).

Monopolists choose the price that corresponds to the quantity where MR equals MC, as determined by the market demand curve.

Marginal cost is the additional cost of producing one more unit of output. In some cases, it might be simplified as a horizontal line.

Marginal Revenue is the additional revenue acquired from selling one more unit of output.

The process of a company or firm making decisions that aim to maximize the total earnings or profits.

Shows the relationship between the price of a good and the quantity consumers are willing to buy.

There isn't a single, unique supply curve for a monopolist like in a competitive market.

A strategy to set the price of a product based on factors like cost of production and market demand. Different from a competitive pricing strategy.

A firm charges each customer the maximum price they are willing to pay for a good or service.

A pricing strategy where lower prices are offered to customers who make purchases well in advance.

A pricing strategy where the price per unit decreases as the quantity purchased increases.

A pricing strategy that combines a fixed upfront fee with a per-unit charge for each item purchased.

Online retailers use collected data to adjust prices for each customer based on their browsing history and other information.

A situation where a change in price significantly affects the quantity demanded. When demand is elastic, a small price increase leads to a large decrease in purchases.

A situation where a change in price has a small effect on the quantity demanded. Even if the price goes up, people still need to buy the product, so the demand doesn't change much.

The difference between the price a consumer is willing to pay for a product and the actual price they pay.

A loss of efficiency that occurs when the price of a product is too high, preventing some consumers from buying it. Overall social welfare is reduced.

Person A, who booked a rental car online weeks in advance, probably has a more elastic demand. They have more time to shop around and find alternative options. Person B, who needs a car immediately after landing, has a less elastic demand. They have fewer choices and are more likely to accept the price.

Person B, who has a less elastic demand, will likely be charged a higher price. Since they have fewer alternatives and are more likely to buy regardless of the price, the car rental company can charge them more.