question
Pure Competition
answer
Very large numbers of sellers, standardized product, price takers, free entry and exit.
question
Long-Run Supply Curve
answer
Decisions are based on the incentives of profits or losses.
question
Constant-Cost Industry
answer
Entry or exit of firms does not effect long-run average total cost, constant resource prices, special case.
question
Increasing-Cost Industry
answer
Most industries, long-run average total cost increases with expansion, specialized resources.
question
Decreasing-Cost Industry
answer
Long-run average total cost will decrease with expansion.
question
Productive Efficiency
answer
P = Minimum ATC
question
Allocative Efficiency
answer
P = MC
question
Consumer Surplus and Producer Surplus in Pure Competition
answer
CS and PS is maximized.
question
Creative Destruction
answer
Creation of new products and methods may destroy old products and methods.
question
Invisible Hand
answer
Self-interested individuals can promote the general benefit of society at large.
question
Long Run
answer
All variable inputs, firms can adjust plant size as well as enter or exit the industry.
question
Short Run
answer
Some variable inputs, fixed plant.
question
Total Costs (TC)
answer
TFC + TVC
question
Average Variable Cost
answer
TVC / Q
question
Average Total Cost
answer
TC / Q
question
Time Periods Considered
answer
Immediate market, short run, long run.
question
Marginal Product
answer
Change in Total Product + Change in Labor Input.
question
Total Fixed Costs (TFC)
answer
Costs that do not vary with output.
question
Total Variable Costs (TVC)
answer
Costs that do vary with output.
question
Average Fixed Cost (AFC)
answer
TFC / Q
question
Marginal Cost
answer
∆TC / ∆Q
question
Average Revenue
answer
TR / Q
question
Total Revenue
answer
P * Q
question
Marginal Revenue
answer
∆TR / ∆Q
question
Profit Maximization
answer
MR = MC
question
Pure Monopoly
answer
Sole producer, unique product, control over price, blocked-entry.
question
Barriers to Entry
answer
Factors that prevent firms from entering the industry.
question
Simultaneous Consumption
answer
A product's ability to satisfy a large number of consumers at the same time.
question
Network Effects
answer
Any situation in which the value of a product, service, or platform depends on the number of buyers, sellers, or users who leverage it.
question
X-Inefficiency
answer
when a lack of effective or real competition in a market or industry means that average costs are higher than they would be with the competition.
question
Rent-Seeking Behavior
answer
An economic concept that occurs when an entity seeks to gain added wealth without any reciprocal contribution of productivity.
question
Price Discrimination
answer
Charging different buyers different prices.
question
Socially Optimal Price
answer
Set price equal to marginal cost.
question
Fair Return Price
answer
Set price equal to average total cost.
question
Monopolistic Competition
answer
A relatively large number of sellers, differentiated products, easy entry, and exit, and nonprice competition like advertising.
question
4-Firm Concentration Ratio (CR), Percentage of sales by 4 largest firms.
answer
Output of four largest firms / total output in the industry.
question
Herfindahl Index (HI), Sum of squared market shares
answer
HI = (%S1)^2 + (%S2)^2 + (%S3)^2 + ... + (%Sn)^2
question
Excess Capacity
answer
Demand for a product is less than the amount of product a business could potentially supply to the market.
question
Productive Inefficiency for Monopolistic Competition
answer
P > min ATC
question
Allocative Inefficiency for Monopolistic Competition
answer
P > MC
question
Nonprice Competition
answer
Make price less of a factor in consumer purchases and to make product differences a greater factor.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
