Microeconomics Exam 2 Terms- Mississippi State University- Leggette

question

Total Revenue

answer

the amount a firm receives from the sale of its output

question

Total Cost

answer

the market value of the inputs a firm uses in production (FC + VC)

question

Explicit Cost

answer

require an outlay of money, e.g., paying wages to workers

question

Implicit Costs

answer

do not require a cash outlay, e.g., the opportunity cost of the owner's time

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Accounting profit

answer

total revenue minus explicit costs

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Economic Profit

answer

total revenue minus total costs (including explicit and implicit costs)

question

Production Function

answer

shows the relationship between the quantity of inputs used to produce a good and the quantity of output of that good (the relationship between inputs and outputs)

question

Marginal product

answer

the increase in output arising from an additional unit of that input, holding all other inputs constant

question

Marginal Cost

answer

is the increase in Total Cost from producing one more unit

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Fixed Cost

answer

do not vary with quantity of output produced

question

Variable Costs

answer

vary with the quantity produced

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Average Total Cost

answer

equals total cost divided by the quantity of output

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Shutdown

answer

a short-run decision not to produce anything because of market conditions

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Exit

answer

A long-run decision to leave the market

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Sunk Cost

answer

a cost that has already been committed and cannot be recovered

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Monopoly

answer

a firm that is the sole seller of a product without close substitutes

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Market Power

answer

the ability to influence the market price of the product it sells

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Barriers to Entry

answer

other firms cannot enter the market

question

Natural Monopoly

answer

a single firm can produce the entire market quantity (Q) at a lower cost than could several firms

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Increasing Q has two effects on revenue:

answer

Output effect: higher output raises revenue
Price effect: lower price reduces revenue

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Price Discrimination

answer

selling the same good at different prices to different buyers

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Willingness to Pay (WTP)

answer

the maximum amount that a buyer will pay for a good

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Perfect Price Discrimination

answer

the monopolist produce the competitive quantity, but charges each buyer their WTP

question

Oligopoly

answer

only a few sellers offer similar or identical products

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Monopolistic competition

answer

many firms sell similar but not identical products

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Concentration Ratio

answer

the percentage of the market's total output supplied by its four largest firms

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Game Theory

answer

the study of how people behave in strategic situations

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Duopoly

answer

An oligopoly with only two firms

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Collusion

answer

an agreement among firms in market about quantities to produce or prices to charge

question

Cartel

answer

a group of firms acting in unison

question

Nash Equilibrium

answer

a situation in which economic participants interacting with one another each choose their best strategy given the strategies that all the others have chosen

question

Dominant Strategy

answer

a strategy that is best for a player in a game regardless of the strategies chosen by the other players

question

Prisoner's Dilemma

answer

a particular "game" between two captured prisoners that illustrates why cooperation is difficult to maintain even when it is mutually beneficial

question

"Tit-for-tat"

answer

whatever your rival does in one round(whether renege or cooperate), you do in the following round

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question

Total Revenue

answer

the amount a firm receives from the sale of its output

question

Total Cost

answer

the market value of the inputs a firm uses in production (FC + VC)

question

Explicit Cost

answer

require an outlay of money, e.g., paying wages to workers

question

Implicit Costs

answer

do not require a cash outlay, e.g., the opportunity cost of the owner's time

question

Accounting profit

answer

total revenue minus explicit costs

question

Economic Profit

answer

total revenue minus total costs (including explicit and implicit costs)

question

Production Function

answer

shows the relationship between the quantity of inputs used to produce a good and the quantity of output of that good (the relationship between inputs and outputs)

question

Marginal product

answer

the increase in output arising from an additional unit of that input, holding all other inputs constant

question

Marginal Cost

answer

is the increase in Total Cost from producing one more unit

question

Fixed Cost

answer

do not vary with quantity of output produced

question

Variable Costs

answer

vary with the quantity produced

question

Average Total Cost

answer

equals total cost divided by the quantity of output

question

Shutdown

answer

a short-run decision not to produce anything because of market conditions

question

Exit

answer

A long-run decision to leave the market

question

Sunk Cost

answer

a cost that has already been committed and cannot be recovered

question

Monopoly

answer

a firm that is the sole seller of a product without close substitutes

question

Market Power

answer

the ability to influence the market price of the product it sells

question

Barriers to Entry

answer

other firms cannot enter the market

question

Natural Monopoly

answer

a single firm can produce the entire market quantity (Q) at a lower cost than could several firms

question

Increasing Q has two effects on revenue:

answer

Output effect: higher output raises revenue
Price effect: lower price reduces revenue

question

Price Discrimination

answer

selling the same good at different prices to different buyers

question

Willingness to Pay (WTP)

answer

the maximum amount that a buyer will pay for a good

question

Perfect Price Discrimination

answer

the monopolist produce the competitive quantity, but charges each buyer their WTP

question

Oligopoly

answer

only a few sellers offer similar or identical products

question

Monopolistic competition

answer

many firms sell similar but not identical products

question

Concentration Ratio

answer

the percentage of the market's total output supplied by its four largest firms

question

Game Theory

answer

the study of how people behave in strategic situations

question

Duopoly

answer

An oligopoly with only two firms

question

Collusion

answer

an agreement among firms in market about quantities to produce or prices to charge

question

Cartel

answer

a group of firms acting in unison

question

Nash Equilibrium

answer

a situation in which economic participants interacting with one another each choose their best strategy given the strategies that all the others have chosen

question

Dominant Strategy

answer

a strategy that is best for a player in a game regardless of the strategies chosen by the other players

question

Prisoner's Dilemma

answer

a particular "game" between two captured prisoners that illustrates why cooperation is difficult to maintain even when it is mutually beneficial

question

"Tit-for-tat"

answer

whatever your rival does in one round(whether renege or cooperate), you do in the following round

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