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microeconomics 3
micro vocab ch 13-17
| Question | Answer |
|---|---|
| industrial organization | the study of how firms’ decisions about prices and quantities depend on the market conditions they face |
| total revenue | the amount a firm receives for the sale of its output |
| total cost | the market value of the inputs a firm uses in production |
| profit | total revenue minus total cost |
| explicit costs | input costs that require an outlay of money by the firm |
| implicit costs | input costs that do not require an outlay of money by the firm |
| accounting profit | total revenue minus total explicit cost |
| economic profit | total revenue minus total cost, including both explicit and implicit costs |
| production function | the relationship between quantity of inputs used to make a good and the quantity of output of that good |
| marginal product | the increase in output that arises from an additional unit of input |
| diminishing marginal product | the property whereby the marginal product of an input declines as the quantity of the input increases |
| fixed costs | costs that do not vary with the quantity of output produced |
| variable costs | costs that vary with the quantity of output produced |
| average total cost | total cost divided by the quantity of output |
| average fixed cost | fixed cost divided by the quantity of output |
| average variable cost | variable cost divided by the quantity of output |
| marginal cost | the increase in total cost that arises from an extra unit of production |
| Average total cost | tells us the cost of a typical unit of output if total cost is divided evenly over all the units produced |
| Marginal cost | tells us the increase in total cost that arises from producing an additional unit of output |
| efficient scale | the quantity of output that minimizes average total cost |
| its minimum | The marginal-cost curve crosses the average-total-cost curve at |
| diseconomies of scale | the property whereby long-run average total cost rises as the quantity of output increases |
| economies of scale | the property whereby long-run average total cost falls as the quantity of output increases |
| constant returns to scale | the property whereby long-run average total cost stays the same as the quantity of output changes |
| specialization | Economies of scale often arise because higher production levels allow |
| coordination problems | Diseconomies of scale can arise because of |
| competitive market | a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker |
| average revenue | total revenue divided by the quantity sold |
| price takers. | Buyers and sellers in competitive markets must accept the price the market determines and, therefore, are said to be |
| the price of the good | average revenue equals |
| marginal revenue | the change in total revenue from an additional unit sold |
| the price of the good | for competitive firms, marginal revenue equals |
| the market price. | a competitive firm is a price taker, so its marginal revenue equals |
| supply curve. | Marginal-cost curve determines the quantity of the good the firm is willing to supply at any price, the marginal-cost curve is the competitive firm’s |
| Shutdown | refers to a short-run decision not to produce anything during a specific period of time because of current market conditions |
| leave the market | Exit refers to a long-run decision to |
| sunk cost | a cost that has already been committed and cannot be recovered |
| sunk cost. | making the short-run decision whether to shut down for a season, the fixed cost of land is said to be a |
| variable costs of production | the firm shuts down if the revenue that it would earn from producing is less than its |
| above average variable cost. | The competitive firm’s short-run supply curve is the portion of its marginal-cost curve that lies |
| the firm exits the market if | the revenue it would get from producing is less than its total costs |
| above average total cost | The competitive firm’s long-run supply curve is the portion of its marginal-cost curve that lies |
| driven to equality | The process of entry and exit ends only when price and average total cost are |
| more elastic than the short-run supply curve. | Because firms can enter and exit more easily in the long run than in the short run, the long-run supply curve is typically |
| a price maker | While a competitive firm is a price taker, a monopoly firm is |
| Monopoly | a firm that is the sole seller of a product without close substitutes |
| barriers to entry | The fundamental cause of monopoly is |
| Barriers to entry | Monopoly resources, Government regulation, production process make up the |
| natural monopoly | a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms |
| natural monopoly | arises when there are economies of scale over the relevant range of output. |
| The output effect: | More output is sold, so Q is higher, which tends to increase total revenue. |
| The price effect: | The price falls, so P is lower, which tends to decrease total revenue. |
| marginal-cost curve | the monopolist’s profit maximizing quantity of output is determined by the intersection of the marginal-revenue curve and the |
| marginal cost | In competitive markets, price equals __________. In monopolized markets, price exceeds it |
| socially efficient | the _________ quantity is found where the demand curve and the marginal-cost curve intersect |
| socially efficient | The monopolist produces less than _______the quantity of output |
| price discrimination | the business practice of selling the same good at different prices to different customers |
| arbitrage, the process | of buying a good in one market at a low price and selling it in another market at a higher price to profit from the price difference. |
| Perfect price discrimination | a situation in which the monopolist knows exactly each customer’s willingness to pay and can charge each customer a different price |
| synergies | companies that merge to lower costs through more efficient joint production known as |
| Oligopoly | a market structure in which only a few sellers offer similar or identical products |
| concentration ratio | which is the percentage of total output in the market supplied by the four largest firms |
| monopolistic competition | a market structure in which many firms sell products that are similar but not identical |
| Many sellers, Product differentiation, Free entry and exit of market | monopolistic competition describes a market with the what attributes: |
| efficient scale of the firm. | The quantity that minimizes average total cost is called the |
| excess capacity | Firms are said to have _________under monopolistic competition |
| The product-variety externality: | Because consumers get some consumer surplus from the introduction of a new product, entry of a new firm conveys a positive externality on consumers. |
| The business-stealing externality: | Because other firms lose customers and profits from the entry of a new competitor, entry of a new firm imposes a negative externality on existing firms |
| Oligopoly | a market structure in which only a few sellers offer similar or identical products |
| game theory | the study of how people behave in strategic situations |
| collusion | an agreement among firms in a market about quantities to produce or prices to charge |
| cartel | a group of firms acting in unison |
| Nash equilibrium | a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen |
| The output effect: | Because price is above marginal cost, selling one more unit at the going price will raise profit |
| The price effect: | Raising production will increase the total amount sold, which will lower the unit price and lower the profit on all the other units sold |
| prisoners’ dilemma | a particular “game” between two captured prisoners that illustrates why cooperation is difficult to maintain even when it is mutually beneficial |
| dominant strategy | a strategy that is best for a player in a game regardless of the strategies chosen by the other players |
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romoore245
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