Market Structures Glossary

The condition where P = MC, meaning resources are allocated to produce the goods consumers value most relative to cost.

Factors preventing new firms from entering a market: economies of scale, patents, licenses, resource control, high capital requirements.

A group of firms that collude to restrict output and raise prices, acting collectively like a monopoly.

The loss of total surplus when a market does not produce the efficient quantity. Caused by market power, taxes, or price controls.

A strategy that yields the best outcome for a player regardless of what other players do.

In monopolistic competition, firms produce below the quantity that minimizes ATC, meaning they could lower costs by producing more.

A market with many firms selling differentiated products and low barriers to entry. Long-run: zero economic profit with excess capacity.

A market with one seller, no close substitutes, and high barriers to entry. The firm is a price maker that produces where MR = MC with P > MC.

A game theory outcome where no player benefits from changing strategy unilaterally. In oligopoly, often the mutual-cheat outcome.

A monopoly arising from economies of scale so large that one firm can serve the entire market at lower cost than multiple firms.

A market dominated by a few large interdependent firms. Strategic behavior is analyzed using game theory.

A market structure with many firms, identical products, free entry/exit, and price-taking behavior. Long-run equilibrium: P = MC = min ATC.

Charging different prices to different consumers for the same good based on willingness to pay. Requires market power and market segmentation.

The condition where a firm produces at the minimum of its ATC curve, using the least resources per unit. Achieved in perfect competition long run.