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Chapter 10 Econ

Chapter 10 Econ
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price setter
A firm that sets or picks price based on its output decision.
monopoly power
The ability to act as a price setter.
barriers to entry
Characteristics of a particular market that block the entry for new firm in a monopoly market.
natural monopoly
A firm that confronts economies of scale over the entire range of outputs demanded in its industry.
sunk cost
An expenditure that has already been made and that cannot be recovered.
network effects
Situations where products become more useful the larger the number of users of the product.
(monopoly) market
Large number of buyers, one seller. Entry is blocked.
demand and marginal revenue curves (monopoly)
The firm faces the market demand curve; marginal revenue is below market demand.
price (monopoly)
The monopoly firm determines price; it's a price setter. Price is greater than marginal cost.
profit maximization (monopoly)
Firms produce where marginal cost equals marginal revenue and charge the corresponding price on the demand curve.
Profit (monopoly)
Because entry is blocked, a monopoly firm can sustain an economic profit in the long run.
efficiency (monopoly)
the equilibrium solution is inefficient because price is greater than marginal cost.