20 flashcards · Shared on 19 August 2026 by AtomAI Library
Flip each card to check yourself.
Which set of features best describes a perfectly competitive market?
Many firms, identical products and low barriers to entry
Which set of features best describes a perfectly competitive market?
Many firms, identical products and low barriers to entry
Why is an individual firm in perfect competition a price taker?
Its output is too small to affect the market price
What is the demand curve facing an individual perfectly competitive firm?
Horizontal at the market price
At which output does a profit-maximizing firm generally produce, provided producing is worthwhile?
Where marginal revenue equals marginal cost
What tends to happen to economic profit in a perfectly competitive industry in the long run?
It is competed away as firms enter the market
Which description best fits monopolistic competition?
Many firms sell differentiated products with relatively low barriers to entry
Why does a firm under monopolistic competition face a downward-sloping demand curve?
Its differentiated product gives it some control over price
Which long-run outcome is typical of monopolistic competition?
Normal economic profit combined with excess capacity
What is an oligopoly?
A market dominated by a small number of interdependent firms
Why is strategic interdependence important in an oligopoly?
Each firm's decisions affect its rivals, whose responses affect the firm in return
In oligopoly analysis, what is collusion?
Firms coordinating prices or output instead of competing independently
What does the prisoner's dilemma help explain about oligopolies?
Why firms may fail to cooperate even when cooperation could benefit them collectively
Which condition is central to a monopoly?
One seller supplies the market and entry is strongly restricted
How does a single-price monopoly choose its profit-maximizing price and output?
It sets output where marginal revenue equals marginal cost, then uses the demand curve to find price
Compared with a perfectly competitive market under similar cost and demand conditions, a profit-maximizing monopoly generally produces what outcome?
A higher price and a smaller quantity
What is a natural monopoly?
A market where one firm can supply total demand at a lower average cost than multiple firms
What is the main welfare consequence of monopoly pricing when price exceeds marginal cost?
Mutually beneficial trades are lost, creating deadweight loss
What are barriers to entry?
Factors that make it difficult or costly for new firms to enter a market
Which is an example of a legal barrier to entry?
A patent granting temporary exclusive rights to an invention
What is price discrimination?
Charging different consumers different prices for the same product when the differences are not based on cost