Microeconomics Chapter on Competition and Monopoly

A market with numerous buyers and sellers, a standardized product, free entry and exit, and perfect information. No single buyer or seller can influence the market price.

A market with a single seller controlling the supply of a unique product with no close substitutes. Barriers to entry are substantial, giving the monopolist market power.

A competitive firm will produce as long as its revenue covers all its variable costs. This indicates they're making enough to pay for their raw materials and labor. But note, they may not earn a profit.

When a firm's average total cost falls as output increases, leading to a single firm supplying the entire market. This is due to large fixed costs or economies of scale.

A monopolist's marginal revenue is always lower than the price, unlike in perfect competition. This happens because they have to lower the price to sell more units, impacting revenue on all units sold.

In the long run, perfectly competitive firms earn zero economic profit. This is because new firms enter the market, increasing supply, and lowering prices until only normal profits remain.

A monopoly results in less consumer surplus and more producer surplus compared to perfect competition. It also creates a deadweight loss, representing lost welfare due to the higher price and lower output.

Price discrimination allows a monopolist to charge different prices to different groups of consumers, allowing them to capture more consumer surplus. This is possible if resale is prevented.

The additional cost incurred by producing one more unit of output.

The revenue generated by selling one more unit of output.

The point where a monopolist maximizes profits. It occurs where marginal cost (MC) equals marginal revenue (MR).

The difference between the price a consumer is willing to pay and the price they actually pay.

The difference between the price a producer receives and the cost of producing a good.

The loss of economic efficiency that occurs when a monopolist restricts output and charges a higher price than in a perfectly competitive market.

The point where a perfectly competitive firm earns zero economic profit in the long run. This occurs when the price equals the minimum average total cost (ATC).

The additional revenue generated by selling one more unit to a specific group of consumers.

The total cost to a firm divided by the total quantity produced.

The supply curve of a single firm in a perfectly competitive market.

The sum of the supply curves of all firms in a perfectly competitive market.

The point where the market supply curve intersects the market demand curve, representing the equilibrium price and quantity in a perfectly competitive market.

A situation where a firm produces at the output level where marginal cost (MC) equals price (P). This maximizes profit in the short run for a perfectly competitive firm.

The difference between total revenue (TR) and total cost (TC) at a given output level. It's the ultimate measure of a firm's financial performance.

Monopolist's marginal revenue (MR) is always lower than the price (P). This is because to sell more units, they must lower the price for all units, impacting revenue on the entire quantity sold.

Monopolist maximizes profit by setting marginal revenue (MR) equal to marginal cost (MC), just like perfect competition, but since MR is lower than P, monopoly price ends up higher.

The loss of welfare due to a monopolist's inefficiency. This occurs because the monopolist produces less output and charges a higher price than perfect competition.

The relationship between the price of a good and the quantity that firms are willing to supply at that price. It's the upward-sloping part of the marginal cost curve.