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Area between Ssocial and Sinternal and under Dinternal (B)
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Deadweight loss associated with market equilibrium
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Club good
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A good that is nonrival and excludable
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Free rider problem
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A major reason why public goods are not supplied by the market
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External cost
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Cost of an activity paid for by a third party
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Externalities
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Costs or benefits of a market activity that affect a third party
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Implicit costs
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Same as opportunity costs
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Accounting profit
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Total revenue - explicit costs
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Average fixed costs continually decrease
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In the short run,
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Economic profit
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Total revenue - (explicit costs + implicit costs)
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Marginal cost curve is below average total cost curve
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When the average total cost curve is downward sloping
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Minimum average total cost
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Firms will break even if the price they charge is equal to
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P=ATC
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Zero economic profit
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Attempt to maximize profits
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Firms in every market structure
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As long as the firm is operating
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Marginal cost curve is the short run supply curve
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A firm expands output until marginal revenue is equal to marginal cost
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Profit maximization occurs when
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Many buyers and sellers, similar products, easy entry into the market
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Three main characteristics of a competitive market
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In the long run, both earn zero economic profit
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One thing that makes monopolistic competition similar to perfect competition is that
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Would most likely remain in the industry
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Monopolistically competitive firms that are earning zero economic profit
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Economies of scale, problems raising capital, control of resources
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Three natural barriers to entry
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Try to maximize profits
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Both monopolies and competitive firms
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There are many small firms in the industry
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One critical characteristic of monopolistic competition is