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Microeconomics chp 8-12
Terms in this set (65)
Total revenue minus economic cost
The opportunity cost of the inputs used in the production process; equal to explicit cost plus implicit cost.
A monetary payment.
An opportunity cost that does not involve a monetary payment
The explicit costs of production.
Total revenue minus accounting cost.
marginal product of labor
The change in output from one additional unit of labor.
As one input increases while the other inputs are held fixed, output increases at a decreasing rate.
A curve showing the relationship between the quantity of labor and the quantity of output produced, ceteris paribus.
fixed cost (FC)
Cost that does not vary with the quantity produced.
variable cost (VC)
Cost that varies with the quantity produced.
short-run total cost (TC)
(The total cost of production when at least one input is fixed; equal to) fixed cost + variable cost.
average fixed cost (AFC)
Fixed cost / output (by the quantity produced)
average variable cost (AVC)
Variable cost / output (by the quantity produced)
short-run average total cost (ATC)
Short-run total cost / output (by the quantity produced); AFC + AVC
short-run marginal cost (MC)
The change in short-run total cost resulting from a one-unit increase in output.
long-run total cost (LTC)
The total cost of production when a firm is perfectly flexible in choosing its inputs.
long-run average cost (LAC)
The long-run total cost / output (by the quantity produced)
constant returns to scale
A situation in which the long-run total cost increases proportionately with output, so average cost is constant
long-run marginal cost (LMC)
The change in long-run cost resulting from a one-unit increase in output.
An input that cannot be scaled down to produce a smaller quantity of output.
economies of scale
A situation in which the long-run average cost of production decreases as output increases.
minimum efficient scale
The output at which scale economies are exhausted.
diseconomies of scale
A situation in which the long-run average cost of production increases as output increases.
perfectly competitive market
A market with many sellers and buyers of a homogeneous product and no barriers to entry.
A buyer or seller that takes the market price as given.
firm-specific demand curve
A curve showing the relationship between the price charged by a specific firm and the quantity the firm can sell.
The change in total revenue from selling one more unit of output.
The price at which economic profit is zero; price equals average total cost.
The price at which the firm is indifferent between operating and shutting down; equal to the minimum average variable cost.
A cost that a firm has already paid or committed to pay, so it cannot be recovered.
short-run supply curve
A curve showing the relationship between the market price of a product and the quantity of output supplied by a firm in the short run.
short-run market supply curve
A curve showing the relationship between the market price and quantity supplied in the short run.
An industry in which the average cost of production increases as the total output of the industry increases; the long-run supply curve is positively sloped.
long-run market supply curve
A curve showing the relationship between the market price and quantity supplied in the long run.
An industry in which the average cost of production is constant; the long-run supply curve is horizontal.
A market in which a single firm sells a product that does not have any close substitutes.
The ability of a firm to affect the price of its product.
barrier to entry
Something that prevents firms from entering a profitable market.
The exclusive right to sell a new good for some period of time.
The value of a product to a consumer increases with the number of other consumers who use it.
A market in which the economies of scale in production are so large that only a single large firm can earn a profit.
deadweight loss from monopoly
A measure of the inefficiency from monopoly; equal to the decrease in the market surplus.
The process of using public policy to gain economic profit.
The practice of selling a good at different prices to different consumers.
A market served by many firms that sell slightly different products.
The process used by firms to distinguish their products from the products of competing firms.
A market served by a few firms
The study of decision making in strategic situations.
The percentage of the market output produced by the largest firms.
A market with two firms.
A group of firms that act in unison, coordinating their price and quantity decisions.
An arrangement in which firms conspire to fix prices.
A graphical representation of the consequences of different actions in a strategic setting.
An action that is the best choice for a
player, no matter what the other player does.
A situation in which both firms in a market would be better off if both chose the high price, but each chooses the low price.
An outcome of a game in which each player is doing the best he or she can, given the action of the other players.
A promise to match a lower price of a competitor
A strategy where a firm responds to underpricing by choosing a price so low that each firm makes zero economic profit.
A strategy where one firm chooses whatever price the other firm chose in the preceding period.
A system under which one firm in an oligopoly takes the lead in setting prices.
A matrix or table that shows, for each possible outcome of a game, the consequences for each player.
The strategy of reducing the price to deter entry.
The price that is just low enough to deter entry.
A market with low entry and exit costs.
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