57: Introduction to market structure Flashcards
price taking firm
a firm whose actions have no effect on the market price of the good it sells
price taking consumer
a consumer who cannot influence the market price of the good he buys
perfectly competitive market
market in which all participants are price takers
perfectly competitive industry
industry where firms are price takers
market share
the fraction of the total industry output accounted for by one firm’s output
commodity (standardized product)
when consumers regard the products of different firms as the same
monopolist
the only producer of a good that has no close substitutes
barrier to entry
something that prevents others from entering an industry, allowing monopolists to make an economic profit
types of barriers to entry (4)
1) control of scarce resource / input
2) economies of scale: large fixed cost of entry
3) technological superiority
4) government created barriers
natural monopoly
monopoly created and sustained by economies of scale
network externality
when the value of a good rises as the number of consumers / users increases (ex: microsoft)
patent
gives an inventor a temporary monopoly in the use or sale of their invention
copyright
gives the creator of an artistic work the sole right to profit from that work
oligopoly
industry with only a few firms
imperfect competition
when no one firm has a monopoly, but producers can effect market prices (have market power)
