In a perfectly competitive market, both buyers and sellers believe that their own actions have no effect on the market price. In contrast, a monopolist, the only seller or potential seller in the industry, sets the price.

The short-run supply curve is the SMC curve above point A, at which the SMC curve crosses the lowest point on the SAVC curve.

The price P1 is the shutdown price, below which the firm cuts its losses by making no output.

A firm’s long-run supply curve, relating output supplied to price in the long run, is that part of its LMC curve above its LAC curve.

When economic profits are zero the firm makes normal profits. Its accounting profits just cover the opportunity cost of the owner’s money and time.

Entry is when new firms join an industry. Exit is when existing firms leave.

The marginal firm in an industry just breaks even.

In short-run equilibrium the price equates the quantity demanded to the total quantity supplied by the given number of firms in the industry when each firm is on its short-run supply curve.

In long-run equilibrium the price equates the quantity demanded to the total quantity supplied by the number of firms in the industry when each firm is on its long-run supply curve and firms can freely enter or exit the industry.

Comparative statics examines how equilibrium changes when demand or cost conditions shift.

A monopolist is the sole supplier and potential supplier of the industry’s product.

The excess of price over marginal cost is a measure of monopoly power. A discriminating monopoly charges different prices to different people.