question
Firm
answer
entry that converts inputs into outputs
question
capital firm
answer
durable goods used in the production of other goods
question
fixed input
answer
quantity won't change as output changes
question
variable input
answer
quantity changes as output changes
question
output
answer
good/service sold to consumers
question
short run
answer
at least one factor of production is fixed (can't change)
question
long run
answer
all factors of production can be varied
question
production of function
answer
relationship the quantities of inputs a firm uses + max quantity output it produces
question
total product (tp) = q
answer
increases w/increase in the number of factors used (to a point)
question
average product (ap)
answer
total output divided by number of inputs
question
marginal product (mp)
answer
change in output occurs when one add. unit of input is added (slope of tp)
question
total product curve (tpc)
answer
slopes upwards b/c more outputs produced as more workers are employed
question
law of diminishing marginal product
answer
add. units of variable inputs are added, eventually the mp of the variable input declines
question
MPL > APL
answer
increasing
question
MPL < APL
answer
decreasing
question
MPL = APL
answer
max value
question
explicit cost
answer
opportunity cost of production requires monetary payment
question
implicit cost
answer
opportunity cost of production doesn't require monetary payment
question
economic profit
answer
total revenue (tr) - (explicit cost + implicit costs)
question
accounting profit
answer
total revenue (tr) - explicit cost
question
fixed cost (fc)
answer
doesn't change w/amount firm produce
question
variable cost (vc)
answer
does change w/amount firm produce
question
total cost (tc)
answer
specific number of output is the sum of fixed cost + variable cost of that quantity of output (tc = fc + vc)
question
marginal cost (mc)
answer
additional cost (ac) of producing the last unit of output
question
average fixed cost (afc)
answer
fixed cost per unit output
question
average variable cost (avc)
answer
variable cost per unit output
question
average total cost (atc)
answer
total cost per unit output
question
marginal < average
answer
average decreasing
question
marginal > average
answer
average increasing
question
marginal = average
answer
atc at minimal level
question
atc curve
answer
u-shaped
question
spreading effect
answer
as output increases, fc spread over more units of quantity
question
diminishing returns effect
answer
mc rises, pulling up avc
question
scale increase
answer
proportional increase in inputs
question
constant return to scale (crs)
answer
increase in input leads to same proportional increase output
question
increase return to scale (irs)
answer
increasing all input levels leads to greater proportional
question
decrease return to scale (drs)
answer
increase in inputs lead to proportionally smaller increase in output
question
economic scale (es)
answer
long run ac falls as output decreases
question
constant economies of scale (ces)
answer
long run atc stays the same as quantity of output changes
question
diseconomies of scale (des)
answer
long run atc rises by increasing output
question
perfect competition (pc)
answer
a market structure in which a large number of firms all produce the same product
question
numerous buyers + sellers
answer
they're many buyers + sellers in perfectly competitive market
question
free entry + exit into + from market
answer
produces enter the market when its profitable and exit when it's unprofitable
question
Price takers
answer
buyers and sellers must accept the price the market determines
question
mr = mc
answer
to max profit, firm will produce
question
mr = price = mc
answer
perfectly competitve markets profit max condition
question
breakeven price
answer
price taking firm is marketing price at which earns zero econ profit
question
zero econ profit in the long run
answer
perfectly competitive firms earn zero in long run due to free entry + exit to the market
question
pure monopoly
answer
market w/single seller whose product has no close substitute
question
monopolist profit
answer
tr - tc = (Pm - ATCm) x Qm
question
barrier to entry
answer
control of scarce resource/input
question
legal barriers
answer
govt. grants firm exclusive right to serve in given area
question
price discrimination
answer
monopolist (price setter) can change different prices to different consumers for the same good
question
perfect price discrimination
answer
monopolist chares consumer his/her willingness to pay (max price each is willing to pay)
question
advance purchase restriction (apr)
answer
prices are lower for those who purchase well in advance
question
advantage of price discrimination
answer
more profit for producers
question
disadvantages of price discrimination
answer
interest of producers
question
game theory
answer
models the behavior of interdependent firm (oligopolists)
question
interdependence
answer
each firm's decision significantly affects profit of other firms
question
player
answer
decision maker
question
rules
answer
simultaneous, sequential
question
strategies
answer
possible courses of action for each player
question
payoffs
answer
reward received by player in game (profit)
question
nash equilibrium
answer
each player chooses action that's best for them given the action of other players + reach same payoff matrix cell (game theory)
question
tit for a tat strategy
answer
most effective to promote cooperation
question
oligopoly
answer
A market structure in which a few large firms dominate a market
question
duopoly
answer
oligopoly with two firms
question
non cooperative oligopoly
answer
each firm makes decisions about output + price independently
question
cooperative oligopoly
answer
decisions are made jointly, 2 or more firms act together
question
cartel
answer
strongest form of collusion
question
if oligopoly collude
answer
wants to act like monopoly; produce monopoly output, charge monopoly price, split monopoly profit
question
repeat interaction overtime
answer
tit for a tat strategy
question
easy to monitor other firms
answer
good info concern prices + output levels
question
little product differentiation
answer
easier to maintain if selling "same" product
question
entry by non colluding firms is difficult
answer
firm successfully conclude collectively hold high market share
question
merge
answer
some firms merge into single entity to avoid cheating
question
monopolistic competition (mc)
answer
market structure that's a little like monopoly + a little like perfect competition
question
product differentiation (pd)
answer
only way firms can acquire some market power
question
style/type, location, quality
answer
important forms of product differentiation
question
economic of advertising
answer
monopolistically competitive firm engages in advertising to increase demand for its products + enhance its market power
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
