ECON1131 Lecture Notes - Lecture 24: Marginal Revenue, De Beers, Monopolistic Competition
Document Summary
In order to develop principles and make predictions about markets and how producers will behave in them, economists have developed four principal models of market structure: perfect competition, monopoly, oligopoly, monopolistic competition. System of market structure is based on two structures: the number of producers in the market, whether the goods offered are identical or differentiated. Differentiated goods are goods that are different but considered somewhat substitutable by consumers. A monopolist is a firm that is the only producer of a good that has no close substitutes. An industry controlled by a monopolist is known as a monopoly. The ability of a monopolist to raise its price above the competitive level by reducing output is known as market power. What does a monopolist do with market power: a monopolist reduces the quantity supplied and moves up the demand curve, raising the price.
