Pure Monopoly - Microeconomics

Marginal Revenue Equation

Marginal revenue (MR) = change in total revenue/change in quantity = (^TR)/(^Q)

Total Revenue Equation

Total Revenue (TR) = Price X Quantity = PxQ

economies of scale

a condition in which the long-run average total cost of production decreasses as production increases

monopoly

a market structure characterized by a single seller, producing a good or service for which there are no close substitutes, in a market with relatively blocked entry. A monopoly is a price maker.

regulated normal profit price

a regulated price that is equal to the average total gost of production. the normal profit prife can be found where the average total cost curve intersects the demand curve

regulated competitive price

a regulated price that is equal to the marginal cost of production. the competitive price can be found where the marginal cost curve intersects the demand curve, and it is allocatively efficient

natural monopoly

an industry in which economines of scale are so extensive that the market is better served by a single firm

barriers to entry

any impediments that prevent firms from entering a market or industry

productive efficiency

producing output at the lowest possible average total cost of production; using the fewest resources possible to produce a good or service.

allocative efficiency

producing the goods and services that are most wanted by consumers in such a way that their marginal benefit equals their marginal cost.

monopoly power

the ability of a monopoly to influence prices by controlling the quantities that it produces in the market

marginal revenue (MR)

the change in a firm's total revenue that results from a one-unit change in output produced and sold.

normal profit

the level of profit that occurs when total revenue is equal to total cost. this level indicates that a firm is doing just as well as it would have if it had chosen to use its resources to produce a different product or compete in a different industry. normal profit is also known as zero economic profit.

economic profit

the level of profit that occurs when total revenue is greater than total cost.

loss

the level of profit that occurs when total revenue is less than total cost.

price discrimination

the practice of selling the same good or service to different consumers at different prices

second-degree price discrimination

the practice of charging different prices per unit for different quantities, or blocks, of a good or service. Also known as block pricing

first-degree price discrimination

the practice of charging each and every consumer the price that she is willing and able to pay for a good or service. also known as perfect price discrimination or personal pricing.

third-degree price discrimination

the practice of dividing market participants into groups based on their elasticities of demand in order to charge eacch group a different price for the same good or service.

unregulated monopoly price

the profit-maximizing price that will result from an unregulated monopolistic market

deadweight loss

the value of economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium