AP Micro Vocab 3
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42 terms
Terms | Definitions |
|---|---|
 Total Revenue (TR) | Amount a firm recieves for the sale of its output |
| Total Cost (TC) | Market value of the inputs a firm uses in production |
| Profit | TR-TC |
| Explicit Costs | Costs that require an outlay of money |
| Implicit Costs | Costs that don't require an outlay of money |
| Economic Profit | TR-TC, including explicit & implicit costs |
| Accounting Profit | TR-Total explicit cost |
| Production Function | Relationship b/w Q of inputs and the Q of the output of a good |
| Marginal Product | Increase in output w/ an additional unit of input |
| Diminishing Marginal Product | Property, marginal product declines as Q of input increases |
| Fixed Costs (FC) | Costs, don't vary w/ Q produced |
| Variable Costs (VC) | Costs, vary w/ Q of output produced |
| Average Total Cost (ATC) | TC / Q of output |
| Average Fixed Cost (AFC) | FC / Q of output |
| Average Variable Cost | VC / Q of output |
| Marginal Cost (MC) | Increase in TC that arises from an extra unit of production |
| Efficient Scale | Q of output that minimizes ATC |
| Economies of Scale | Property, long-run ATC falls as Q of output rises |
| Diseconomies of Scale | Property, long-run ATC rises as Q of output rises |
| Constant Returns to Scale | Property, long-run ATC stays the same as Q of output increases |
| Price Takers | Buyers/ Sellers in a competitive market |
| Competitive Market | Market w/ many buyers & sellers trading identical products so that each is a price taker |
| Average Revenue (AR) | TR / Q sold |
| Marginal Revene (MR) | Change in TR from an additional unit sold |
| Shut Down | Short-run decision to cease production due to current market decisions |
| Exit | Long-run decision to cease production & leave the market |
| Sunk Cost | Cost that is not recoverable |
| Monopoly | Firm that's the sole seller of a product w/o close substitutes |
| Natural Monopoly | Arises b/c a single firm can supply a good/service to an entire market at a smaller cost than could more firms |
| Price Discrimination | Selling the same product at different prices to different customers |
| Arbitrage | Buyina a good in one market at a low price and selling it in another at a higher price |
| Perfect Price Discrimination | When a monopolist is able to charge each cusotmer according to his/her WTP |
| Oligopoly | Market structure, only a few sellers offer similar of identical products |
| Monopolistic Competition | Market structure, many firms sell similar products |
| Free Entry | A situation where firms can enter the market w/o restriction |
| Game Theory | Study of how people behave in strategic situations |
| Duopoly | Oligopoly w/ two firms |
| Collusion | Agreement among firms about quantities to produce or prices to charge |
| Cartel | Group of firms acting in unison |
| Nash Equilibrium | When economic actors interacting /w one another choose the best strategy given the strategies that the others have chosen |
| Prisoners' Dilemma | "Game" that shows why cooperation is difficult to maintain even when it's mutually beneficial |
| Dominant Strategy | Strategy that's best for a player in a game regardles of the strategies of the others |
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