Microeconomics Modules 19-21

A _____ _____ is a cost that does not depend on the quantity of output produced. - Capital, overhead, rent

A _____ _____ is a cost that depends on the quantity of output produced. It is the cost of the variable input. - raw materials, direct labor, utilities

The _____ _____ of producing a given quantity of output is the sum of the fixed cost and the variable cost of producing that quantity of output. TC=FC+VC

The ____ ____ ___ shows how total cost depends on the quantity of output. figure 19.1

is the added cost of doing something one more time. In the context of production, marginal cost is the change in total cost generated by producing one more unit of output.
MC=Change in total cost generated by one additional unit of output=Change in total cost/Change in quantity of output. figure 19.2 Upward sloping curve

___ ___ ___, often referred to simply as average cost, is total cost divided by quantity of output produced. ATC=TC/Q

___ ___ ___, or AFC, is fixed cost divided by the quantity of output. AFC=FC/Q Is the fixed cost per unit of output. Should start flattening as production becomes efficient.

___ ___ ___, or AVC, is variable cost divided by the quantity of output, also known as variable cost per unit of output. AVC=VC/Q SEE TABLE 19.2 Is the variable cost per unit of output.

A ___________________ falls at low levels of output and then rises at higher levels.

The ____-____ ___ is hte quantity of output at which average total cost is lowest---it corresponds to the bottom of the U-shaped average total cost curve.

The larger the output, the greater the quantity of output over which fixed cost is spread, leading to lower average fixed cost.

The larger the output, the greater the amount of variable input required to produce additional units, leading to higher average variable cost.

The ______________ shows the relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output.

There are _______________ when long-run average total cost declines as output increases.SEE table 20.1

There are ______________ when output increases more than in proportion to an increase in all inputs. For example, with increasing returns to scale, doubling all inputs would cause output to more than double.

There are ______________ when long-run average total cost increases as output increases.

There are ___________ when output increases less than in proportion to an increase in all inputs.

There are ___________ when output increases directly in proportion to an increase in all inputs

A ___ ___ is a cost that has already been incurred and is nonrecoverable. A sunk cost should be ignored ina decision about future actions. Example: mistakes, return costs,

A __________ is a firm whose actions have no effect on the market price of the good or service it sells.

A __________ is a consumer whose actions have no effect on the market price of the good or service he or she buys.

A _____________ is a market in which all market participants are price-takers. - Generic labeled products...

A ____________ is an industry in which firms are price-takers.

A firms's _______ _______ is the fraction of the total industry output accounted for by that firm's output.

A good is a ______ ______, also known as a ________, when consumers regard the products of different firms as the same good.

An industry has ______________ when new firms can easily enter into the industry and existing firms can easily leave the industry.

A ______ is the only producer of a good that has no close substitutes. An industry controlled by a monopolist is known as a ___________.

To earn economic profits, a monopolist must be protected by a _____ to ______---something that prevents other firms from entering the industry. -control of natural resources or inputs--Debeers; - increasing returns to scale---natural monopoly, utilities; - government- created barriers including patents and copyrights---pharmaceuticals.

A ______ ______ exists when economies of scale provided a large cost advantage to a single firm that produces all of an industry's output.

A _____ gives an inventor a temporary monopoly in the use or scale of an invention.

A ____ gives the creator of a literary or artistic work the sole right to profit from that work.

An ______ is an industry with only a small number of firms. A producer in such an industry is known as an ______for example the four.

When no one firm has a monopoly, but producers nonetheless realize that they can affect market prices, an indiustry is characterized by _____ _____.

_________ _______ measure the percentage of industry sales accounted for by the "X" largest firms, for example the four-firm concentration ratio or the eight-firm concentration ratio.

_____________ _______, or HHI, is the square of each firm's share of market sales summed over the industry. It gives a picture of the industry market structure. HHI=Ind1sq+Ind2sq+Ind3sq TABLE 21.1

__________ _______ is a market structure in which there are many competing firms in an industry, each firm sells a differentiated product, and there is free entry into and exit from the industry in the long run.