question
Implicit Cost (synonym)
answer
Implicit Rental Rate of Capital
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Economic depreciation
answer
change in the market value of capital over a given period
question
Interest forgone
answer
return on the funds used to acquire the capital
question
normal profit
answer
return that an entrepreneur can expect to get
question
Command systems
answer
managerial hierarchy. Commands pass downward through the hierarchy and information (feedback) passed upward
question
Inventive systems
answer
Market-like mechanisms to induce workers to perform in ways that maximize the firm's profit
question
Perfect (full) information
answer
when all relevant information is known
question
Imperfect information
answer
when all relevant info is not known
question
Symmetric information
answer
when all individuals have the same information
question
Principal-agent problem
answer
Problem of devising compensation rules that induce an agent to act in the best interests of a principal
question
Economies of Scale
answer
Features of a firm's tech that lead to falling long run avg cost as output increases
question
Diseconomies of scale
answer
features of a firm's technology that lead to constant long run average cost as output increases
question
Constant returns to scale
answer
firm's tech that lead to constant long run average cost as output increases
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Profit maximizing rate of production
answer
Marginal Revenue equals Marginal Cost
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Short Run Break-Even Price
answer
Price at which a firm's total revenues equal its costs. Firm making a normal RoR on its capital investment
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Short Run Shutdown Price
answer
Price that just covers average variable costs. Just below the intersection of the marginal cost curve and the average variable cost curve
question
Industry Supply Curve
answer
Sum of each firm's MC curves
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Zero-profit equilibirum
answer
Economic profit is zero
Accounting profit is positive
Accounting profit is positive
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Monopoly Characteristics
answer
Market power. Monopolist
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Source of Monopoly
answer
Barrier to entry
Ownership of resources without close substitutes.
Problems in raising adequate capital
Economies of scale
Legal or governmental restrictions
Natural
Ownership of resources without close substitutes.
Problems in raising adequate capital
Economies of scale
Legal or governmental restrictions
Natural
question
Oligoply
answer
Very few dominant sellers
Each seller knows that the other sellers will react to its changes in prices and quantities
Each seller knows that the other sellers will react to its changes in prices and quantities
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Characteristics of Oligopoly
answer
- Small number of firms
- Price searchers
- High barriers to entry
- Similar or differentiated goods or services
- Mergers
- Interdependence
- Price searchers
- High barriers to entry
- Similar or differentiated goods or services
- Mergers
- Interdependence
question
Components of game theory
answer
Players
Strategies
Information
Payoffs
Strategies
Information
Payoffs
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Simultaneous Game
answer
All go at once without knowing
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Sequential Game
answer
Move in different order and know who does what
question
zero sum game
answer
Any gains within the group are exactly offset by equal losses by EOG
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Negative-Sum Game
answer
Players as a group lose at the end of the game
question
Positive-sum game
answer
players as a group are better off at the end of the game
question
Opportunistic Behavior
answer
ignore possible long-run benefits of cooperation and focus solely on short-run gains. Noncooperative game. Not realistic
question
Nash Equilibrium
answer
Each players makes the best decisions that he or she can. Taking into account the decisions of the others
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Extensive form games
answer
Game that is built like a tree diagram
question
Determinants of Demand
answer
- Income
- tastes and preferences
- Price of related goods in consumption
- Taxes and subsidies on consumption
- Expectations
- Market size
- tastes and preferences
- Price of related goods in consumption
- Taxes and subsidies on consumption
- Expectations
- Market size
question
Determinants of Supply
answer
- Cost of inputs
- Price of related goods in production
- Technology and productivity
- Taxes and subsidies on production
- Price expectations
- Number of firms
- Price of related goods in production
- Technology and productivity
- Taxes and subsidies on production
- Price expectations
- Number of firms
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