Microeconomics Chapter 7, 8, 9, & 10

opportunity cost of resources employed by a firm that takes the form of cash payments

a firm's opportunity cost of using its own resources or those provided by its owners without a corresponding cash payment

a firm's total revenue minus its explicit costs

a firm's total revenue minus its explicit and implicit costs

the accounting profit earned when all resources earn their opportunity cost; equal to implicit cost

any resource that can be varied in the short run to increase or decrease production

any resource that cannot be varied in the short run

a period during which at least one of a firm's resources is fixed

a period during which all resources under the firm's control are variable

as more of a variable resource is added to a given amount of other resources, marginal product eventually declines and could become negative

a firm's total output

the relationship between the amount of resources employed and a firm's total product

the change in total product that occurs when the use of a particular resource increases by one unit, all other resources constant

the marginal product of a variable resource increases as each additional unit of that resource is employed

any production cost that is independent of the firm's rate of output

any production cost that changes as the rate of output changes

the sum of fixed cost and variable cost, or TC = FC +VC

the change in total cost resulting from a one-unit change in output; the change in total cost divided by the change in output

variable cost divided by output, or AVC = VC/q

total cost divided by output, or ATC = TC/q; the sum of average fixed cost and average variable cost, or ATC = AFC + AVC

forces that reduce a firm's average cost as the scale of operation increases in the long run

forces that may eventually increase a firm's average cost as the scale of operation increases in the long run

a curve that indicates the lowest average cost of production at each rate of output when the size, or scale, of the firm varies; also called the planning curve

a condition that occurs if, over some range of output, long-run average cost neither increases nor decreases with changes in firm size

the lowest rate of output at which a firm takes full advantage of economies of scale

important features of a market, such as the number of firms, product uniformity across firm's, firm's ease of entry and exit, and forms of competition

a market structure with many fully informed buyers and sellers of a standardized product and no obstacles to entry or exit of firms in the long run

a standardized product; a product that does not differ across producers, such as a bushel of wheat or an ounce of gold

a firm that faces a given market price and whose quantity supplied has no effect on that price; a perfectly competitive firm that decides to produce must accept, or "take," the market price

the firm's change in total revenue from selling an additional unit; also a perfectly competitive firm's market price

to maximize profit or minimize loss, a firm should produce the quantity at which marginal revenue equals marginal cost; this rule holds for all market structures

total revenue divided by quantity, or AR = TR/q; in all market structures, equals market price

a curve that shows how much a firm supplies at each price in the short run; in perfect competition that portion of a firm's marginal cost curve that intersects and rises above the low point on its average variable cost curve

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

a curve that shows the relationship between price and quantity supplied by the industry once firms adjust in the long run to any change in market demand

an industry that can expand or contract without affecting the long-run per-unit cost of production; the long-run industry supply curve is horizontal

an industry that faces high per-unit production costs as industry output expands in the long run; the long-run industry supply curve slopes upward

the condition that exists when production uses the least-cost combination of inputs; minimum average cost in the long run

the condition that exists when firms produce the output most preferred by consumers; marginal benefit equals marginal cost

a bonus for producers in the short run; the amount by which total revenue from production exceeds variable cost

the overall wellbeing of people in the economy; maximized when the marginal cost of production equals the marginal benefit to consumers

any impediment that prevents new firms from entering an industry and competing on an equal basis with existing firms

a legal barrier to entry that grants the holder the exclusive right to sell a product for 20 years from the date the patent application is filed

the process of turning an invention into a marketable product

a firm with some power to set the price because the demand curve for its output slopes downward; a firm with market power

net loss to society when a firm with market power restricts output and increases the price

activities undertaken by individuals or firms to influence public policy in a way that increases their incomes

increasing profit by charging different groups of consumers different prices for the same product

a monopolist who charges a different price for each unit sold; also called the monopolist's dream

a market structure with many firms selling products that are substitutes but different enough that each firm's demand curve slopes downward; firm entry is relatively easy

the difference between a firm's profit-maximizing quantity and the quantity that minimizes average cost; firms with excess capacity could reduce average cost by increasing quantity

a market structure characterized by so few firms that each behaves interdependently

an oligopoly that sells a commodity, or a product that does not differ across suppliers, such as an ingot of steel or a barrel of oil

an oligopoly that sells products that differ across suppliers, such as automobiles or breakfast cereal

an agreement among firms to increase economic profit by dividing the market and fixing the price

a group of firms that agree to coordinate their production and pricing decisions to reap monopoly profit

a firm whose price is matched by other firms in the market as a form of tacit collusion

an approach that analyzes oligopolistic behavior as a series of strategic moves and countermoves by rival firms

a game that shows why players have difficulty cooperating even though they would benefit from cooperation

in game theory, the operational plan pursued by a player

in game theory, a table listing the payoffs that each player can expect from each move based on the actions of the other player

in game theory, the outcome achieved when each player's choice does not depend on what the other player does

a market with only two suppliers; a special type of oligopoly market structure

a situation in which a firm, or a player in game theory, chooses the best strategy give the strategies chosen by others; no participant can improve his or her outcome by changing strategies even after learning of the strategies selected by other participants

in game theory, a strategy in repeated games when a player in one round of the game mimics the other player's behavior in the previous round; an optimal strategy for getting the other player to cooperate

a type of game in which a Nash equilibrium occurs when each player chooses the same strategy; neither player can do better then a matching the other player's strategy