Monopolies, patents and products that stand out from the crowd. Explore the words that describe markets without perfect competition.
These terms were extracted from Principles of Microeconomics by Dr. Emma Hutchinson, University of Victoria, eCampusOntario which is licensed under a Creative Commons Attribution 4.0 International License. Based on Principles of Microeconomics by OpenStax, licensed under CC BY 4.0.
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The increase in revenue resulting from a marginal increase in quantity
Since firms have no influence on the market price in a perfectly competitive market, price = marginal revenue, which is constant regardless of the production level.
a situation in which one firm produces all of the output in a market
Many of the case studies in this text have focused on current events, but lets step into the past to observe how monopoly, or near monopolies, have helped shape history.
a monopolist that can only charge one price
In the last section, we introduced a single price monopoly, saying that the monopolist must charge the same price to all consumers.
the action of selling the same product at a different price to each consumer, equal to their maximum willingness to pay
Consider a case where the producer can charge the exact willingness to pay of each consumer, a perfect price discrimination.
the action of selling the same product at different price to maximize profits
Notice that Luxottica is not a single price monopoly, as it practices a form of price discrimination by having multiple brands aimed at different consumers.
the legal, technological, or market forces that may discourage or prevent potential competitors from entering a market
Barriers to entry are the legal, technological, or market forces that discourage or prevent potential competitors from entering a market.
a form of legal protection to prevent copying, for commercial purposes, original works of authorship, including books and music
Copyright protection generally lasts for the life of the author plus 70 years.
removing government controls over setting prices and quantities in certain industries
The deregulation of Canada’s airline industry in the 1980s let new carriers enter the market and compete on price.
the body of law including patents, trademarks, copyrights, and trade secret law that protect the right of inventors to produce and sell their inventions
Countries around the world have enacted laws to protect intellectual property, although the time periods and exact provisions of such laws vary across countries.
legal prohibitions against competition, such as regulated monopolies and intellectual property protection
The act continued the tax on teas and made the East India Company the sole legal supplier of tea to the American colonies, giving them legal monopoly power.
economic conditions in the industry, for example, economies of scale or control of a critical resource, that limit effective competition
One is a natural monopoly, where the barriers to entry are something other than legal prohibition.
a government rule that gives the inventor the exclusive legal right to make, use, or sell the invention for a limited time
To prevent this from happening, the patent act was created in Canada as a part of the British North America Act in 1869.
when an existing firm uses sharp but temporary price cuts to discourage new competition
One method is known as predatory pricing, in which a firm uses the threat of price cuts to discourage competition.
methods of production kept secret by the producing firm
There is also a body of law known as trade secrets.
an identifying symbol or name for a particular good and can only be used by the firm that registered that trademark
A trademark is an identifying symbol or name for a particular good, like Chevrolet cars, or the Nike “swoosh” that appears on shoes and athletic gear.
a product that is perceived by consumers as distinctive in some way
Products that are distinctive in one of these four ways are called differentiated products.
many firms competing to sell similar but differentiated products
Monopolistic competition and oligopoly fall between the two extremes.