question
Economic Cost
answer
the value of all resources used to produce a good or service; opportunity cost
question
Explicit Cost
answer
opportunity cost of resources employed by a firm that takes the form of cash payments
question
Implicit Cost
answer
a non-monetary opportunity cost
question
Short Run Time
answer
a period of time in which producers are able to change the quantities of some but not all of the resources they employ
question
Long Run Time
answer
a period of time long enough to enable producers of a product to change the quantities of all the resources they employ
question
Law of Diminishing Returns
answer
the principle that, at some point, adding more of a variable input, such as labor, to the same amount of a fixed input, such as capital, will cause the marginal product of the variable input to decline
question
Total Product
answer
total output produced by the firm
question
Marginal Product
answer
the increase in output that arises from an additional unit of input
question
Average Product
answer
the average amount produced by each unit of a variable factor of production
question
Average Variable Cost
answer
variable cost divided by the quantity of output
question
Total Revenue
answer
the total amount of money a firm receives by selling goods or services
question
Marginal Revenue
answer
the additional income from selling one more unit of a good; sometimes equal to price
question
Profit Maximizing
answer
MR=MC
question
Break Even point
answer
the point at which the costs of producing a product equal the revenue made from selling the product
question
Shut Down (close-down)
answer
when price is about the average variable cost
question
MR (P) = MC Rule
answer
applies to all industries
question
Short Run Supply curve
answer
the portion of the MC curve above the AVC curve
question
Long Run supply curve
answer
a curve that shows the relationship in the long run between market price and the quantity supplied
question
constant cost industry
answer
an industry that can expand or contract without affecting the long run per-unit cost of production; the long-run industry supply curve is horizontal
question
increasing cost industry
answer
an industry that faces higher per-unit production costs as industry output expands in the long run; the long run industry supply curve slopes upward
question
Herfindahl Index
answer
a measure of the concentration and competitiveness of an industry; calculated as the sum of the squared percentage market shares of the individual firms in the industry
question
Economic profit
answer
total revenue minus total cost, including both explicit and implicit costs
question
Marginal cost
answer
the cost of producing one more unit of a good
question
Economies of Scale
answer
factors that cause a producer's average cost per unit to fall as output rises
question
Diseconomies of scale
answer
the property whereby long-run average total cost rises as the quantity of output increases
question
Pure (perfect) Competition
answer
An industry with many businesses selling identical products
question
Pure (Perfect) Monopoly
answer
one firm sells a unique product; entry is blocked; firm controls product price; nonprice competition may or may not be found
question
Monopolistic Competition
answer
a market structure in which many companies sell products that are similar but not identical
question
Oligopoly
answer
A market structure in which a few large firms dominate a market
question
Imperfect Competition
answer
a market structure that does not meet the conditions of perfect competition
question
Price Maker
answer
a firm that does not have to consider competitors when setting the prices of its products
question
Price Taker
answer
a buyer or seller that is unable to affect the market price
question
Average Revenue
answer
total revenue divided by the quantity sold
question
Decreasing Cost Industry
answer
An industry in which expansion through the entry of firms lowers the prices that firms in the industry must pay for resources and therefore decreases their production costs.
question
homogenous oligopoly
answer
an oligopoly in which the firms produce a standardized product
question
Differentiated oligopoly
answer
an oligopoly in which the firms produce a differentiated product
question
price leadership
answer
the strategy by which one or more dominant firms set the pricing practices that all competitors in an industry follow
question
collusive (monopoly)
answer
a situation in which firms act together and in agreement to fix prices, divide a market, or otherwise restrict competition
question
cartel
answer
a formal organization of producers that agree to coordinate prices and production
question
normal profit
answer
a profit that allows a business to survive and grow
question
accounting profit
answer
total revenue minus total explicit cost
question
socially optimal price
answer
The price of a product that results in the most efficient allocation of an economy's resources and that is equal to the marginal cost of the product.
question
fair return price
answer
the price of a product that enables its producer to obtain a normal profit and that is equal to the average total cost of producing it
question
game theory (prisoner's dilemma)
answer
A means of analyzing the pricing behavior of oligopolists that uses the theory of strategy associated with games such as chess and bridge.
question
Nash Equilibrium
answer
a situation in which each firm chooses the best strategy, given the strategies chosen by other firms
question
price war
answer
a series of competitive price cuts that lowers the market price below the cost of production
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
