Terms and concepts

Monopolistic competition is characterized by a relatively large number of sellers producing differentiated products (clothing, furniture, books).

A monopsony is a market condition in which there is only one buyer, the monopsonist. Like a monopoly, a monopsony also has imperfect market conditions

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  Any firm should shut down if P < AVC at output level where MR = MC
  

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  If monopoly suddenly finds that P < AVC, government will usually not allow it to shut down,
  
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    Instead use tax revenue to make up for firm’s losses
    

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  Monopoly: An industry structure where a single firm produces a product for which there are no close substitutes. Monopolists are price makers. Barriers to entry and exit exist, and, in order to ensure profits, a monopoly will attempt to maintain them.
  
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