pure monopoly
A market structure in which one firm sells a unique product into which entry is blocked in which the single firm has considerable control over product price and in which nonprice competition may or may not be found.
barriers to entry
Anything which artificially prevents the entry of firms into an industry.
X-inefficiency
Failure to produce any specific output at the lowest average (and total) cost possible.
rent-seeking behavior
The actions by persons firms or unions to gain special benefits from government at the taxpayers’ or someone else’s expense.
price discrimination
The selling of a product to different buyers at different prices when the price differences are not justified by differences in cost.
socially optimal price
The price of a product which results in the most efficient allocation of an economy’s resources and is equal to the marginal cost of the product.
fair-return price
The price of a product which enables its producer to obtain a normal profit and which is equal to the average total cost of producing it.
dilemma of regulation
The tradeoff a regulatory agency faces in setting the maximum legal price a monopolist may charge: The socially optimal price is below average total cost (and either bankrupts the firm or requires that it be subsidized) while the higher fair-return price does not produce allocative efficiency.