| A | B |
|---|
| monopoly | market with single supplier that has no close substitutes and barrier to entry prevents competition |
| close substitutes | not static because technology can create substitutes; an arrival of new product can also create monopoly |
| three types of barrier to entry | natural, ownership, and legal |
| natural barrier to entry | technology for producing a good/service allows one firm to meet entire market demand at lower ATC than two or more firms could |
| ownership barrier to entry | entry restricted by ownership of a natural resource |
| four types of legal barriers to entry | public franchise, government license, patent, and copyright |
| public franchise | exclusive right granted to a firm to supply a good/service |
| government license | controls entry into particular occupations and industries |
| patent | exclusive right granted to the inventor of a product/service |
| copyright | exclusive right granted to the author or composer of a literary, musical, dramatic or artistic work |
| monopoly price-setting strategies | single price and price discrimination |
| single price monopoly | selling at the same price to all customers |
| price discrimination | able to sell different units at different prices |
| single price monopoly/price and MR | demand for firms output in monopoly is market demand; TR = p*q; MR = change in total revenue from one unit increase in quantity sold |
| MR and elasticity | monopoly never profitably produces an output in the inelastic range of its demand curve |
| Monopoly and demand curve | ALWAYS operates on the elastic portion |
| monopoly and profit-maximizing output level | equate MR to MC; then use Demand curve to determine P |
| perfect competition vs monopoly with same cost of productions | monopoly produces a lower quantity at a higher price |
| competitive producer vs monopoly producer | perfectly competitive producer = price taker; monopolist chooses product price |
| monopoly output and price decision | monopoly charges price that exceeds MC |
