Economics of Monopoly (Revision Quizlet Activity)

Here is a selection of key terms linked to the market structure of monopoly together with some quizlet revision activities.

Monopoly power in markets - some key terms to revise

• Bi-lateral monopoly: Where a monopsony buyer faces a monopsony seller in a market
• Concentration ratio: Measures the proportion of an industry's output or employment accounted for by the largest firms
• Deadweight loss: Loss in producer & consumer surplus due to an inefficient level of production
• Dominant firm: Business with more than 40 percent of market share
• Entry barriers: Strategies used to protect the market power of established firms whilst maintain supernormal profits
• Industry regulator: Appointed by government to oversee how a market works and the outcomes that result for producers and consumers
• Limit pricing: When a firm sets price low enough to discourage new entrants into the market.
• Market liberalisation: Introducing competition in previously monopolistic sectors such as energy supply, retail banking and postal services
• Market power: Power to raise price above marginal cost without fear of losing supernormal profits to new entrants
• Monopoly profit: Supernormal profit to a firm with market power, achieved when price (AR) > average cost
• Natural monopoly: When long-run average cost (LRAC) falls continuously over a large range of output so only one firm can fully exploit economies of scale
• Predatory pricing: A deliberate strategy of driving competitors out of the market by setting very low prices or selling below AVC
• Price discrimination: Charging different prices to different groups of consumers for the same product for reasons not associated with the marginal cost of supply
• Pure monopoly: The only supplier in an industry - with a 100 percent market share. The firm is the industry
• Rent seeking: Behaviour by producers in a market that improves the welfare of one but at the expense of another. A feature of monopoly and oligopoly
• Welfare loss: Overall reductions in consumer welfare when firms use their market power to raise price above a competitive level
• Working monopoly: Business with more than 25 percent share of a defined market
• X-inefficiency: When the lack of competition leads to higher average costs than necessary to supply a given level of output