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Principals of Microeconomics Final Exam
Terms in this set (37)
Chapter 12: Production and Cost
As few inputs as possible are used.
Producing at the lowest possible cost.
Economies of Scale
The more you make, the less it costs.
Constant Returns to Scale
When long-term ATC's do not change as output increases (flat part of curve).
Minimum Level of Efficiency
"Selling enough to pay the bills." Point on graph before you hit Constant Returns to Scale.
Diseconomies of Scale
When long-run ATC's increase as output increases.
Factors that cause Diseconomies of Scale...
1. Loss of Team Spirit
2. Not enough oversight
Economies of Scope
When the cost of producing goods are independent so that it is less costly for a firm to produce one good when it is already producing another.
Chapter 13: Perfect Competition
Perfectly Competitive Market
A market in which economic forces operate unimpeded. Buyers and Sellers are price takers. Consumers benefit with competition.
Barriers to Entry
There are no BTE in a Perfectly Competitive Market. Anyone is free to enter at their will.
For a Perfectly Competitive Market to exist...
1. Buyers and sellers are price takers.
2. No barriers to entry
3. Products are identical
The change in total revenue associated with the change in quantity.
The change in total cost associated with a change in quantity.
Marginal Revenue, Marginal Cost and Price
If MC<P, you can afford to make more
If MC=P, good
If MC>P, you can afford to cut back on production
The point where a firm will be better off shutting down instead of staying in business.
The amount the owners would have received in their next best alternative.
Chapter 14: Monopoly and Monopolistic Competition
A market structure in which one firm makes up the ENTIRE market. It is the complete opposite of competition.
Monopolies exist because of Barriers to Entry...
1. Legal barriers, i.e.: Patents
2. Sociological barriers, i.e.: Customs/Traditions
3. Natural barriers, i.e.:Ability to produce what others cannot
4. Technological barriers, i.e.: Size of market can only produce one firm
When a monopoly discriminates, it charges different prices to different groups.
i.e.: Senior citizen discounts
A firm is better at producing the good than everyone else.
Single firm can produce at a lower cost that can 2 or more firms.
Characteristics of Monopolistic Competiton
1. Many sellers
2. Product differentiated
3. Multiple dementions of competition
4. Ease of entry of new firms in the long run
Chapter 17: Work in the Labor Market
Where individuals supply labor for a wage.
How much a person will change hours worked in response to a wage change.
Taxes reduce the net wage of individuals, reducing the incentive to work.
Immigrants decrease the wage rate. The flow of people plays an important role in elasticity of labor supplies.
The demand for factors of production by firms depends on consumers demand.
A person who wants to open their own business. Must have..
1. High degree of organizational skills
2. Oversight abilities
Determination of Wages
Supply and Demand STRONGLY influence wages but do NOT fully determine the wages.
Want higher wages for workers.
Union negotiates on your behalf.
A market in which a single firm is the one and only buyer.
A single seller of labor faces a single buyer of labor.
Comparable Work Laws
Mandate comparable pay for comparable work.
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