question
short run
answer
period during which some inputs are fixed
question
long run
answer
period during which all inputs are variable
question
total production
answer
quantity of output a firm produces
question
marginal product
answer
the change in a firms output relative to the change in input
question
average product
answer
output per input
question
law of diminishing returns
answer
when a producer adds more of a variable input while other variables are fixed, marginal product will eventually fall
question
explicit costs
answer
costs easily measured by accountants (wages, rent, insurance)
question
implicit costs
answer
costs that arise from not doing something else (opportunity costs)
question
economic costs
answer
explicit + implicit
question
total costs
answer
fixed + variable
question
fixed costs
answer
the costs of all fixed inputs
question
variable costs
answer
the costs of variable inputs
question
average fixed cost
answer
on average, how much of the cost of a unit is a fixed cost
question
average variable cost
answer
on average, how much of a unit of output is a variable cost
question
marginal cost
answer
change in total cost / change in quantity
question
economies of scale
answer
using more fixed inputs drives costs down
question
neither economies nor diseconomies of scale
answer
using more fixed outputs does not affect costs
question
diseconomies of scale
answer
using more fixed inputs makes production more costly
question
total revenue
answer
price x quantity
question
profit
answer
total revenue - total costs
question
accounting profit
answer
total revenue - explicit costs
question
economic profit
answer
total revenue - economic costs
question
economic costs
answer
implicit = explicit
question
positive economic profit
answer
doing better than its next best opportunity
question
negative economic profit
answer
doing worse than in its next best opportunity
question
zero economic profit
answer
doing as well as it would in its next best opportunity
question
characteristics of perfect competition
answer
homogenous goods, many buyers and sellers, free entry
question
marginal revenue
answer
total revenue / quantity
question
a firm that should shut down in the short run
answer
profit below AVC
question
increasing cost industries
answer
when firms enter, and industry output increases, costs increase
when firms exit, and industry costs decrease, costs decrease
when firms exit, and industry costs decrease, costs decrease
question
constant-cost industries
answer
when firms enter, and industry output increases, costs stay the same
when firms exit, and industry output decreases, costs stay the same
when firms exit, and industry output decreases, costs stay the same
question
decreasing cost industries
answer
when firms enter, and industry output decreases, costs decrease
when firms exit, and industry output decreases, costs increase
when firms exit, and industry output decreases, costs increase
question
price discrimination
answer
firms with the ability to raise their price without losing all their customers, taking advantage of differences in their own-price elasticity of demand
question
first degree price discrimination
answer
the amazing telepathic monopolist
question
second degree price discrimination
answer
quality based pricing (non linear pricing)
question
third degree price discrimination
answer
charging different prices to people with differing observable characteristics
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