Exam 3 economics 20-29 - Assignment Essays

question

fixed imput

answer

An imput whose quantity is fixed for a period of time and cannot be varied

question

variable input

answer

an input whose quantity the firm can vary at any time

question

production function

answer

the relationship between quantity of inputs used to make a good and the quantity of output of that good

question

long run

answer

the time period in which all inputs can be varied

question

short run

answer

the period of time during which at least one of a firm's inputs is fixed

question

total product curve

answer

shows how the quantity of output depends on the quantity of the variable input, for a given quantity of the fixed input

question

marginal product

answer

the extra output or change in total product caused by the addition of one more unit of variable input

question

diminishing returns to an input

answer

when an increase in the quantity of that input, holding the levels of all other inputs fixed, leads to a decline in the marginal product of that input

question

fixed costs

answer

Cost that does not depend on the quantity of output produced

question

variable costs

answer

Cost that depends on the quantity of output produced

question

total cost

answer

fixed costs plus variable costs

question

marginal cost equation

answer

change in total cost / change in quantity

question

average total cost

answer

total cost divided by the quantity of output

question

average total cost formula

answer

ATC = TC/Q

question

average fixed cost

answer

fixed cost divided by the quantity of output

question

average variable cost

answer

variable cost divided by the quantity of output

question

minimum-cost output

answer

is the quantity of output at which average total cost is lowest-- the bottom of the U-shaped average total cost curve

question

long-run average total cost curve

answer

shows the relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output

question

increasing returns to scale

answer

when long-run average total cost declines as output increases
Tend to make firms larger

question

decreasing returns to scale

answer

when long-run average total cost increases as output increases
Tend to make firms smaller

question

constant returns to scale

answer

the situation in which a firm's long-run average costs remain unchanged as it increases output
Scale has no effect

question

price-taking producer

answer

a producer whose actions have no effect on the market price of the good or service it sells

question

price-taking consumer

answer

a consumer whose actions have no effect on the market price of the good or service he or she buys

question

perfectly competitive market

answer

A market that meets the conditions of (1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market.

question

standardized product (commodity)

answer

when consumers regard the products of different producers as the same good

question

market share

answer

a company's product sales as a percentage of total sales for that industry

question

free entry and exit

answer

when new producers can easily enter into an industry and existing producers can easily leave that industry

question

Monopoly

answer

A single producer that is able to dominate the market for a good or service without effective competition

question

barriers to entry

answer

factors that make it difficult and costly for an organization to enter a particular task environment or industry

question

natural monopoly

answer

a market that runs most efficiently when one large firm supplies all of the output

Creates a barrier to entry

question

network externality

answer

a situation in which the usefulness of a product increases with the number of consumers who use it

question

patents and copyrights

answer

Barriers from government to create temporary monopoly

question

imperfect competition

answer

a market structure that does not meet the conditions of perfect competition

question

Oligopoly

answer

A market structure in which a few large firms dominate a market

question

Oligopolists

answer

individual firms in an oligopoly market

question

collusion

answer

cooperate to raise their joint profits rather than compete with one another.

question

Herfindahl-Hirschman Index

answer

Adds up the sum of the squares of the largest firms in the market

question

monopolistic competition

answer

a market structure in which many companies sell products that are similar but not identical

question

optimal output rule

answer

profit is maximized by producing the quantity of output at which the marginal revenue of the last unit produced is equal to its marginal cost

question

marginal revenue

answer

the additional income from selling one more unit of a good; sometimes equal to price

question

price-taking firm's optimal output rule

answer

P=MC at the perfectly competitive firm's profit maximizing quantity of output

question

profit determination rule

answer

Whether a producer is profitable depends on a comparison of the market price of the good to the producer's break - even price - its minimum average total cost

question

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.

question

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.

question

shut down rule

answer

a firm should shut down if the price falls below the minimum AVC

question

interim production decision rule

answer

The firm produces in the short run to minimize loss

question

short-run industry supply curve

answer

a curve that indicates the quantity supplied by the industry at each price in the short run; in perfect competition, the horizontal sum of each firm's short-run supply curve

question

industry supply curve

answer

a graphical representation that shows the relationship between the price of a good and the total output of the industry for that good

question

short-run market equilibrium

answer

when the quantity supplied equals the quantity demanded, taking the number of producers as given

question

long-run industry supply curve

answer

shows how the quantity supplied responds to the price once producers have had time to enter or exit the industry

question

single-price monopolist

answer

offers its product to all consumers at the same price

question

price discrimination

answer

division of customers into groups based on how much they will pay for a good

question

perfect price discrimination

answer

takes place when a monopolist charges each consumer his or her willingness to pay—the maximum that the consumer is willing to pay

1 of 53

question

fixed imput

answer

An imput whose quantity is fixed for a period of time and cannot be varied

question

variable input

answer

an input whose quantity the firm can vary at any time

question

production function

answer

the relationship between quantity of inputs used to make a good and the quantity of output of that good

question

long run

answer

the time period in which all inputs can be varied

question

short run

answer

the period of time during which at least one of a firm's inputs is fixed

question

total product curve

answer

shows how the quantity of output depends on the quantity of the variable input, for a given quantity of the fixed input

question

marginal product

answer

the extra output or change in total product caused by the addition of one more unit of variable input

question

diminishing returns to an input

answer

when an increase in the quantity of that input, holding the levels of all other inputs fixed, leads to a decline in the marginal product of that input

question

fixed costs

answer

Cost that does not depend on the quantity of output produced

question

variable costs

answer

Cost that depends on the quantity of output produced

question

total cost

answer

fixed costs plus variable costs

question

marginal cost equation

answer

change in total cost / change in quantity

question

average total cost

answer

total cost divided by the quantity of output

question

average total cost formula

answer

ATC = TC/Q

question

average fixed cost

answer

fixed cost divided by the quantity of output

question

average variable cost

answer

variable cost divided by the quantity of output

question

minimum-cost output

answer

is the quantity of output at which average total cost is lowest-- the bottom of the U-shaped average total cost curve

question

long-run average total cost curve

answer

shows the relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output

question

increasing returns to scale

answer

when long-run average total cost declines as output increases
Tend to make firms larger

question

decreasing returns to scale

answer

when long-run average total cost increases as output increases
Tend to make firms smaller

question

constant returns to scale

answer

the situation in which a firm's long-run average costs remain unchanged as it increases output
Scale has no effect

question

price-taking producer

answer

a producer whose actions have no effect on the market price of the good or service it sells

question

price-taking consumer

answer

a consumer whose actions have no effect on the market price of the good or service he or she buys

question

perfectly competitive market

answer

A market that meets the conditions of (1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market.

question

standardized product (commodity)

answer

when consumers regard the products of different producers as the same good

question

market share

answer

a company's product sales as a percentage of total sales for that industry

question

free entry and exit

answer

when new producers can easily enter into an industry and existing producers can easily leave that industry

question

Monopoly

answer

A single producer that is able to dominate the market for a good or service without effective competition

question

barriers to entry

answer

factors that make it difficult and costly for an organization to enter a particular task environment or industry

question

natural monopoly

answer

a market that runs most efficiently when one large firm supplies all of the output

Creates a barrier to entry

question

network externality

answer

a situation in which the usefulness of a product increases with the number of consumers who use it

question

patents and copyrights

answer

Barriers from government to create temporary monopoly

question

imperfect competition

answer

a market structure that does not meet the conditions of perfect competition

question

Oligopoly

answer

A market structure in which a few large firms dominate a market

question

Oligopolists

answer

individual firms in an oligopoly market

question

collusion

answer

cooperate to raise their joint profits rather than compete with one another.

question

Herfindahl-Hirschman Index

answer

Adds up the sum of the squares of the largest firms in the market

question

monopolistic competition

answer

a market structure in which many companies sell products that are similar but not identical

question

optimal output rule

answer

profit is maximized by producing the quantity of output at which the marginal revenue of the last unit produced is equal to its marginal cost

question

marginal revenue

answer

the additional income from selling one more unit of a good; sometimes equal to price

question

price-taking firm's optimal output rule

answer

P=MC at the perfectly competitive firm's profit maximizing quantity of output

question

profit determination rule

answer

Whether a producer is profitable depends on a comparison of the market price of the good to the producer's break - even price - its minimum average total cost

question

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.

question

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.

question

shut down rule

answer

a firm should shut down if the price falls below the minimum AVC

question

interim production decision rule

answer

The firm produces in the short run to minimize loss

question

short-run industry supply curve

answer

a curve that indicates the quantity supplied by the industry at each price in the short run; in perfect competition, the horizontal sum of each firm's short-run supply curve

question

industry supply curve

answer

a graphical representation that shows the relationship between the price of a good and the total output of the industry for that good

question

short-run market equilibrium

answer

when the quantity supplied equals the quantity demanded, taking the number of producers as given

question

long-run industry supply curve

answer

shows how the quantity supplied responds to the price once producers have had time to enter or exit the industry

question

single-price monopolist

answer

offers its product to all consumers at the same price

question

price discrimination

answer

division of customers into groups based on how much they will pay for a good

question

perfect price discrimination

answer

takes place when a monopolist charges each consumer his or her willingness to pay—the maximum that the consumer is willing to pay

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