question
assymetic information
answer
consumers/producers don't have the same information as the other (sometimes illegal)
question
theory of the firm
answer
how firms operate within a market
question
total product
answer
total output produced by the firm
question
average product
answer
the average amount produced by each unit of a variable factor of production. total product / labour
question
marginal product
answer
extra output due to the addition of one more unit of input
question
total costs
answer
total cost of production incurred by a firm. fixed costs + variable costs
question
fixed costs
answer
costs that remain constant as output changes
question
variable costs
answer
cost of an additional variable (e.g. labour)
question
Semi-variable costs
answer
costs that vary somewhat based on the number of units you sell
question
average variable cost
answer
TC-FC/units produced
question
marginal cost
answer
the cost of producing one more unit of a good
question
short-run costs
answer
at least one factor of production is restricted
question
long-run costs
answer
all inputs are variable, none are restricted
question
economies of scale
answer
factors that cause a producer's average cost per unit to fall as output rises
question
increasing returns to scale
answer
% output > % input (good for businesses)
question
constant returns to scale
answer
% output = % input (best for businesses, lowest cost possible to produce well) MES
question
profit
answer
mow much money a company makes. revenue - cost
question
non-profit
answer
costs are about equal to profit
question
perfect/infinite competition
answer
theoretical market where there are no monopolies. characterized by straight line (AR=MR=P)
question
Assumptions of Perfect Competition
answer
1. A large number of buyers and sellers
2. Homogeneous products
3. No barriers to entry or exit
4. Perfect information
5. Perfect factor mobility
2. Homogeneous products
3. No barriers to entry or exit
4. Perfect information
5. Perfect factor mobility
question
total revenue
answer
Price x Quantity
question
marginal revenue
answer
extra revenue from the sale of one additional unit of output. TR2 -TR1 / Q2-Q1
question
average revenue
answer
average price that every unit of output sells for
question
normal profit
answer
revenue = cost (non-profit organizations aim for this)
question
abnormal profit
answer
profit in excess of normal profit (gain actual money, most businesses aim for this)
question
Monoploies
answer
one firm controls most of the marker (price making firm)
question
Oligopoly
answer
A market structure in which a few large firms dominate a market
question
collusive oligopoly
answer
models where firms agree to mutually improve their situation
question
perfect competition (graph)
answer
undefined
question
Monopoly (graph)
answer
undefined
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