question
Producer's Surplus
answer
the difference between the lowest price a seller is willing to accept and the price actually received
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price elasticity of supply
answer
the percentage change in quantity supplied divided by the percentage change in price
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Principle-Agent Problem
answer
When the agent (worker or manager) doesn't act in the best interest of the principle (owner).
question
diseconomies of scale
answer
when all inputs are variable and the change in costs is MORE than the change in output
question
economies of scale
answer
when all inputs are variable and the change in costs is LESS than the change in output
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marginal cost
answer
the cost of producing one more unit of a good
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Variable cost
answer
costs that vary with input
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fixed costs
answer
Costs that do not vary with the quantity of output produced
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total cost
answer
fixed costs plus variable costs
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economic profit/loss
answer
the difference between total revenue and total cost with cost measured by the value of the next best alternative foregone.
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accounting profit/loss
answer
the difference between total revenue and total cost, both measured according to accepted accounting principles
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Nonmoney Costs
answer
Costs imputed as measures of the value of opportunities foregone.
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money costs
answer
costs incurred in a marketplace as the seller buys inputs.
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Returns to scale
answer
how output is affected by a given percentage change in all inputs
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law of diminishing marginal product
answer
As successive units of an input are applied to a fixed input, or set of fixed inputs, eventually additions to output will decrease, ceteris paribus
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production function
answer
the relationship between quantity of inputs used to make a good and the quantity of output of that good
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factors of production
answer
land, labor, capital, entrepreneurship
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long-run
answer
the time period in which all inputs can be varied
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short-run
answer
the period of time during which at least one of a firm's inputs is fixed
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supply
answer
The amount of goods available
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market structure
answer
The nature and degree of competition among firms operating in the same industry.
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market power
answer
the ability of a company to change prices and output like a monopolist
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rent-seeking behavior
answer
The actions by persons, firms, or unions to gain special benefits from government at the taxpayers' or someone else's expense.
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price taker
answer
a buyer or seller that is unable to affect the market price
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Perceived demand
answer
demand as seen by the seller
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identical products
answer
There are no differences between the products sold by different suppliers
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rival product
answer
a product that can only benefit one consumer at a time
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excludable product
answer
producers can prevent some people from consuming the good or service based on their ability or willingness to pay
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total revenue
answer
Price x Quantity
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average revenue
answer
total revenue divided by the quantity sold
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marginal revenue
answer
extra revenue from the sale of one additional unit of output
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break-even price
answer
The price where average revenue is equal to average total cost. Below this price, the firm will shut down in the long run.
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shut-down price
answer
The price where average revenue is equal to average variable cost. Below this price, the firm will shut down in the short run.
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short run market supply
answer
a curve showing the relationship between the market price and quantity supplied in the short run
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constant cost industry
answer
Entry (or exit) of firms does not shift the cost curves of firms in the industry
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increasing cost industry
answer
Entry of new firms shifts the cost curves for all firms upward
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decreasing cost industry
answer
Entry of new firms shifts the cost curves for all firms downward
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Long-run market supply
answer
The quantity supplied at each price, after firms are given time to vary all inputs and to enter and exit the industry.
question
social surplus
answer
the sum of consumer surplus and producer surplus
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