question
monopoly
answer
a market with a single firm that produces a good or service with no close substitutes and that is protected by a barrier that prevents others firms from entering that market
question
no close substitutes, barrier to entry
answer
two key reasons monopoly arises
question
barrier to entry
answer
a constraint that protects a firm from potential competitors
question
natural, ownership, legal
answer
three types of barrier to entry
question
natural monopoly
answer
a market in which economies of scale enable one firm to supply the entire market at the lowest possible cost
question
ownership barrier
answer
occurs if one firm owns a significant portion of a key resource
question
legal monopoly
answer
a market in which competition and entry are restricted by the granting of a public franchise, government license, patent, or copyright
question
single-price monopoly
answer
a firm that must sell each unit of its output for the same price to all its customers
question
price discrimination
answer
when a firm sells different units of a good or service at different prices
question
economic rent
answer
any surplus - consumer surplus, producer surplus, or economic profit
question
social interest theory
answer
the political and regulatory process relentlessly seeks out inefficiency and introduces regulation that eliminates deadweight loss and allocates resources efficiently
question
capture theory
answer
regulation serves the self interest of the producer who captures the regulator and maximizes economic profit
question
marginal cost pricing rule
answer
the quantity demanded at a price equal to marginal cost is the efficient quantity - the quantity at which marginal benefit equals marginal cost
question
average cost pricing rule
answer
sets price equal to average total cost
question
rate of return regulation
answer
a firm must justify its price by showing that its return on capital doesn't exceed a specified target rate
question
price cap regulation
answer
a rule that specifies the highest price the firm is permitted to set
question
perfect competition
answer
- many firms sell identical products to many buyers
- there are no restrictions on entry into the market
- established firms have no advantage over new ones
- sellers and buyer are well informed about prices
- there are no restrictions on entry into the market
- established firms have no advantage over new ones
- sellers and buyer are well informed about prices
question
price taker
answer
a firm that cannon influence the market price because its production is an insignificant part of the total market
question
total revenue
answer
equals the price of a firm's output multiplied by the units of outputs sold (price x quantity)
question
marginal revenue
answer
the change in total revenue that results from a one-unit increase in the quantity sold (calculated vy dividing the change in total revenue by the change in the quantity sold)
question
shutdown point
answer
the price and quantity at which it is indifferent between producing and shutting down; occurs at the price and the quantity at which average variable cost is at a minimum (loss = total fixed cost)
question
short-run market supply curve
answer
shows the quantity supplied by all the firms in the market at each price when each firm's plant and the number of firms remain the same
question
sunk cost
answer
the past expenditure on a plant that has no resale value
question
total product
answer
the maximum output that a given quantity of labor can produce
question
marginal product or labor
answer
the increase in total product that results from a one-unit increase in the quantity of labor employe, with al other inputs remaining the same
question
average product of labor
answer
equal to total product divided by the quantity go labor employed
question
diminishing marginal returns
answer
occur when the marginal product of an additional worker is less than the marginal product of the previous worker
question
law of diminishing returns
answer
as a firm uses mrs of a variable factor of production with a given quantity of the fixed factor of production, the marginal product of the variable factor eventually diminishes
question
total cost
answer
the cost of all the factors of production it uses
question
total fixed cost
answer
the cost of the firm's fixed factor
question
total variable cost
answer
the cost of the firm's variable factors
question
marginal cost
answer
the increase in total cost that results from a one-unit increase in output
question
average fixed cost
answer
is total fixed cost per unit of output
question
average variable cost
answer
total variable cost per unit of output
question
average total cost
answer
total cost per unit of output
question
long-run average cost curve
answer
the relationship between the lowest attainable average total cost and output when the firm can change both the plant it uses and the quantity of labor it employs
question
diseconomies of scale
answer
features of a firm's technology that make average total cost rise as output increases
question
constant returns to scale
answer
features of a firm's technology that keep average total cost constant as output increases
question
minimum efficient scale
answer
the smallest output which long-run average reaches its lowest level
question
economic profit
answer
equal to total revenue minus total cost, with total cost measure as the opportunity cost of production
question
implicit rental rate
answer
when a firm uses its own capital
question
economic depreciation
answer
the fall in the market capital of a firm's capital over a given period
question
normal profit
answer
the return to entrepreneurship is profit and the profit that an entrepreneur earns on average
question
technology efficiency
answer
occurs when the firm produces a given output by using the least amount of inputs
question
economic efficiency
answer
occurs when the firm produces a given output at the least cost
question
command system
answer
a method of organizing production that uses a managerial hierarchy
question
incentive system
answer
a method of organizing production that uses a market-like mechanism inside the firm
question
principal-agent problem
answer
the problem of devising compensation rules that induce an agent to act in the best interest of a principal
question
monopolistic competition
answer
a market structure in which a large number of firms compete by making similar but slightly different products
question
oligopoly
answer
a market structure I'm which a small number of firms compete
question
four-firm concentration ratio
answer
the percentage of the value of sales accounted for by the four largest firms in an industry
question
HHI (Herfindahl-Hirschman Index)
answer
the square of the percentage market share of each firm summer over the largest 50 firms
question
transaction costs
answer
the costs that arise from finding someone with whom to do business, of reaching an agreement about the price and other aspects of the exchange, and of ensuring that the terms of the agreement are fulfilled
question
economies of scale
answer
when the cost of production a unit of good falls as its output rate increases
question
economies of scope
answer
when a firm uses specialized and often expensive resources to produce a range of goods and services
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
