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Constant-cost industry
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Increasing-cost industry
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Microecon Ch11/12
| Question | Answer |
|---|---|
| Constant-cost industry | An industry in which the entry and exit of firms have no effect on the prices that firms in the industry must pay for resources and thus having no effect on production costs |
| Increasing-cost industry | An industry in which expansion through the entry of new firms raises the prices that firms in the industry must pay for resources, therefore increasing production costs. |
| Decreasing-cost industry | An industry in which expansion through the entry of firms lowers the prices that firms in the industry must pay for resources, therefore decreasing their production costs |
| Productive efficiency | The production of a good in the least costly way; occurs when production takes place at the output at which ATC is a minimum and marginal product per dollar's worth of input is the same for all inputs |
| Allocative efficiency | The allocation of resources among firms and industries to obtain the production of the products most wanted by society; the output of each product at which its marginal cost and price (marg. benefit) are equal. Consumer surplus+producer surplus maximized |
| Pure monopoly | A market structure in which one firm sells a unique product, into which entry is blocked, in which the firm has considerable control over price, and in which nonprice competition may or may not be found |
| Barriers to entry | Anything that artificially prevents the entry of firms into an industry |
| Simultaneous consumption | The same-time derivation of utility from some product by a large number of consumers |
| Network effects | Increases in the value of a product to each user, including existing users, as the total number of users rises |
| X-inefficiency | The production of output, whatever its level, at a higher average (and total) cost than is necessary for producing that level of output |
| Rent-seeking behavior | The actions by persons, firms, or unions to gain special benefits from government at the taxpayers' or someone else's expense |
| Socially optimal price | 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 a product |
| Fair-return price | For natural monopolies subject to rate (price) regulation, the price that would allow the regulated monopoly to earn a normal profit; a price equal to ATC |
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