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Four Market Model Summary: Monopoly definitions

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  • Monopoly
    A market structure with a single supplier, high entry barriers, and the ability to set prices above marginal cost.
  • Barriers to Entry
    Obstacles like patents, ownership of resources, or economies of scale that prevent new firms from entering a market.
  • Natural Monopoly
    A situation where economies of scale make it most efficient for a single firm to supply the entire market.
  • Patent
    A government-granted exclusive right to produce and sell an invention, often lasting 20 years.
  • Market Power
    The ability to influence price and output levels due to limited competition.
  • Marginal Revenue
    The additional income from selling one more unit, always below price in this market structure.
  • Marginal Cost
    The extra cost incurred from producing one additional unit of output.
  • Profit Maximizing Quantity
    The output level where the extra income from selling one more unit equals the extra cost of producing it.
  • Long Run Profits
    Sustained earnings above normal returns due to restricted competition and high entry barriers.
  • Demand Curve
    A graphical representation showing the relationship between price and quantity demanded, always above marginal revenue here.
  • Utilities
    Industries like electricity supply, often cited as examples due to their single-provider nature.
  • Prescription Drugs
    Products often protected by patents, granting exclusive production rights and market control.
  • Average Revenue
    Total income divided by quantity sold, equal to price in all market structures.
  • Economies of Scale
    Cost advantages gained when production becomes efficient, often leading to single-firm dominance.