Imperfect Competition Imperfect competition refers to those market structures that fall between perfect competition and pure monopoly. Imperfect competition includes industries in which firms have competitors but do not face so much competition that they are price takers
Monopoly While a competitive firm is a price taker, amonopoly firm is a price maker. A firm is considered a monopoly if . . . – it is the sole seller of its product. – its product does not have close substitutes
The Law of Supply Firms are willing to produce and sell agreater quantity of a good when the priceof the good is higher. This results in a supply curve that slopesupward
“The best things in life are free. . .” Free goods provide a special challenge foreconomic analysis Most goods in our economy are allocatedin markets… for these goods, prices are the signalsthat guide the decisions of buyers andsellers
Market Efficiency-Market Failure Recall that: Adam Smith’s “invisible hand” of the marketplace leads self-interested buyers and sellers in a market to maximize the total benefit that society can derive from a market
Revisiting the Market Equilibrium Do the equilibrium price and quantity maximize the total welfare of buyers and sellers? Market equilibrium reflects the way markets allocate scarce resources. Whether the market allocation is desirable is determined by welfare economics
