Marginal Analysis
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| know why economic costs include both explicit costs and implicit costs | show 🗑
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| show | The law of diminishing returns describes what happens2output as a fixed plant is used more intensively.As successive units of a variable resource like labor R added to a fixed plant, beyond some point the MP associated w/each add. unit of a rsrce.declines
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| show | FC are costs that do not vary w/changes in output unlike VC that change w/the level of output. TC is the sum of fixed cost and variable cost at each level of output. AC is per-unit costs. MC is the extra,or add.,cost of producing one more unit of output.
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| show | A purely competitive industry consists of a large number of independent firms producing a standardized product. Pure competition assumes that firms and resources are mobile among different industries.
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| show | Applying the MR(=P)=MC rule at various possible market prices leads to the conclusion that the segment of the firm’s short-run marginal-cost curve that lies above the firm’s average-variable-cost curve is its short-run supply curve.
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| law of diminishing marginal utility | show 🗑
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| show | the satisfaction or pleasure one gets from consuming
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| total utility | show 🗑
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| marginal utility | show 🗑
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| show | use his or her money income to derive the greatest amount of satisfaction, or utility,
from it. Consumers want to get “the most for their money” or, technically, to maximize their total utility.
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| show | At any point in time the consumer
has a fixed, limited amount of money income. Since
each consumer supplies a finite amount of human
and property resources to society, he or she earns
only limited income.
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| utility-maximizing rule | show 🗑
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| consumer equilibrium | show 🗑
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| income effect | show 🗑
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| show | the impact that a change in a product’s price has on its relative expensiveness and consequently on the quantity demanded.
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| show | branch of economics that combines economics, psychology,&neuroscience to understand those situations when actual choice behavior deviates from the predicted,which incorrectly concluded that people were always rational,deliberate, & unswayed by emotions
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| status quo | show 🗑
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| show | that for losses and gains near the status quo, losses are felt much more intensely than gains—in fact, about 2.5 times more intensely.
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| show | how consumers plan for and deal with life’s ups and downs as well as why they often appear narrow-minded and fail to “see the big picture.”
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| show | Changes in people’s preferences that are caused by new information that alters the frame used to define whether situations are gains or losses
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| anchoring | show 🗑
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| mental accounting | show 🗑
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| show | which is the tendency that people have to put a higher valuation on anything that they currently possess (are endowed with) than on identical items that they do not own but might purchase.
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| economic cost | show 🗑
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| show | revealed and expressed costs i.e. payments made to outside suppliers
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| implicit costs | show 🗑
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| show | Revenue - Explicit costs
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| normal profit | show 🗑
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| economic profit | show 🗑
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| short run | show 🗑
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| show | Variable plant period, In microeconomics, a period of time long enough to enable producers of a product to change the quantities of all the resources they employ; period in which all resources and costs are variable and no resources or costs are fixed
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| show | Total quantity or output of a particular good or service produced
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| marginal product (MP) | show 🗑
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| average product (AP) | show 🗑
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| show | As successive units of a variable resource are added to a fixed resource beyond some point the extra or marginal product that can attributed to each additional unit of the variable resource will decline
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| show | Do not vary with changes in output
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| show | Change with level of output, reflects law of diminishing return
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| show | TFC + TVC
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| show | TFC/Q (output)
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| average variable cost (AVC) | show 🗑
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| average total cost (ATC) | show 🗑
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| show | Additional cost of producing one more unit of output
MC = change in TC / Change in Q
change to total variable expense resulting from one more unit change to output.
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| show | Reductions in the average total cost of producing a product as the firm expands the size of plant (its output) in the long run; the economies of mass production.
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| diseconomies of scale | show 🗑
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| constant returns to scale | show 🗑
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| show | The lowest level of output at which a firm can minimize long-run average total cost
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| show | An industry in which economies of scale are so great that a single firm can produce the product at a lower average total cost than would be possible if more than one firm produced the product.
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| show | A market structure in which a very large#of firms sells a standardized product: -entry is very easy -individual seller has no control over the product price -there is no nonprice competition -market characterized by a very large # of buyers and sellers.
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| pure monopoly | show 🗑
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| monopolistic competition | show 🗑
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| show | A market structure in which a few firms sell either a standardized or differentiated product.
-entry is difficult
-the firm has limited control over product price because of mutual interdependence
-there is typically non price competition
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| show | All market structures except pure competition; includes monopoly, monopolistic competition, and oligopoly .
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| price taker | show 🗑
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| average revenue | show 🗑
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| show | The total number of dollars received by a firm (or firms) from the sale of a product; equal to the total expenditures for the product produced by the firm
-equal to the quantity sold (demanded) multiplied by the price at which it is sold.
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| marginal revenue | show 🗑
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| break-even point | show 🗑
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| show | The principle that a firm will maximize its profit (or minimize its losses) by producing the output at which marginal revenue and marginal cost are equal, provided product price is equal to or greater than average variable cost.
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| short-run supply curve | show 🗑
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| long-run supply curve | show 🗑
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| show | Expansion by the entry of new firms has no effect on the prices firms in the industry must pay for resources
-no effect on production costs.
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| show | Expansion through the entry of new firms raises the prices firms in the industry must pay for resources
-increases their production costs
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| show | Expansion through the entry of firms lowers the prices that firms in theindustry must pay for resources
-decreases their production costs.
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| show | Production of a good in the least costly way P=Minimum ATC
-occurs when production takes place at the output at
which average total cost is a minimum and marginal product per dollar's worth of input is the same for all inputs.
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| show | apportionment of resources among industries to obtain the produc.of the products most wanted by society P=MC Achieved when every unit of every good whose marginal benefit= MC is produced& output level is charact. by max.combined consumer&producer surplus.
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| consumer surplus | show 🗑
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| producer surplus | show 🗑
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| creative destruction | show 🗑
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| show | A market structure in which one firm sells a unique product
-entry is blocked
-single firm has considerable control over product price
-nonprice competition may or may not be found.
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| barriers to entry | show 🗑
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| show | The same-time derivation of utility from some product by a large number of consumers.
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| show | Increases in the value of a product to each user, including existing users, as the total number of users rises.
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| show | The production of output, whatever its level, at a higher average (and total) cost than is necessary for producing that level of output
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| rent-seeking behavior | show 🗑
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| show | The selling of a product to different buyers at different prices when the price differences are not justified by differences in cost.
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| socially optimal price | show 🗑
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| fair-return price | show 🗑
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| monopolistic competition | show 🗑
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| product differentiation | show 🗑
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| show | Competition based on distinguishing one's product by means of product differentiation and advertising the distinguished products to consumers
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| show | The percentage of total industry sales accounted for by the top four firms in the industry
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| show | A measure of the concentration competitiveness of an industry calculated as the sum of the squared percentage market shares of the individual firms in the industry
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| excess capacity | show 🗑
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| oligopoly | show 🗑
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| show | Oligopoly in which firms produce a standardized product
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| differentiated oligopoly | show 🗑
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| show | Self interested economic actions that take into account the expected reactions of others
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| show | Change in strategy of one firm will affect the sales and profits of another firm. Rivals will react to these changes
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| show | Competition for sales between the products of one industry and the products of another industry
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| import competition | show 🗑
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| game theory | show 🗑
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| show | Situation in which firms act together and in agreement to fix prices, divide a market, restricting competition
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| show | Demand curve for a non collusive oligopolist based on the assumption that rivals will match a price decrease and ignore a price increase
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| show | Successive and continued decreases in price charged by firms in an oligopolistic industry. Each firm lowers its price below rivals hoping to increase its sales and revenues at its rivals expense
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| show | Formal agreement among firms in an industry to set the price of a product and establish the outputs of the individual firms or to drive the market for the product geographically
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| show | Informal method that firms in an oligopoly may employ to set price of their product: one firm announces change in price other firms soon announce identical or similar changes
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