Term
|
Definition
The situation in which unlimited wants exceed the limited resources available
to fulfill those wants. |
|
|
Term
|
Definition
| The situation in which a good or service is produced at the lowest possible cost. |
|
|
Term
|
Definition
| A state of the economy in which production is in accordance with consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it. |
|
|
Term
| Production Possibilities Frontier (PPF) |
|
Definition
| A curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology. |
|
|
Term
|
Definition
| The ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources |
|
|
Term
|
Definition
| The ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors. |
|
|
Term
| Perfectively Competitive Market |
|
Definition
| market in which there are many buyers and sellers, all the products are, and there are no barriersnew sellers entering the market. |
|
|
Term
|
Definition
| A good for which the demand increases as income rises and decreases as income falls. |
|
|
Term
|
Definition
| A good for which the demand increases as income falls and decreases as income rises. |
|
|
Term
| Price Ceiling/ Price Floor |
|
Definition
| A legally determined maximum price that sellers may charge. /A legally determined minimum price that sellers may receive. |
|
|
Term
|
Definition
| The reduction in economic surplus resulting from a market not being in competitive equilibrium. |
|
|
Term
|
Definition
| A market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production, and in which the sum of consumer surplus and producer surplus is at a maximum. |
|
|
Term
|
Definition
The percentage change in quantity demanded is greater than the percentage change in price, so the price elasticity is
greater than 1 in absolute value. |
|
|
Term
|
Definition
| When the percentage change in quantity demanded is less than the percentage change in price, so the price elasticity is less than 1 in absolute value. |
|
|
Term
|
Definition
| When the percentage change in quantity demanded is equal to the percentage change in price, so the price elasticity is equal to 1 in absolute value. |
|
|
Term
| Determinants of Price Elasticity |
|
Definition
• Availability of Close Substitutes
• Passage of Time
• Luxuries versus Necessities
• Definition of the Market
• Share of a Good in a Consumer’s Budget |
|
|
Term
|
Definition
| Cross-price elasticity of demand The percentage change in quantity demanded of one good divided by the percentage change in the price of another good. |
|
|
Term
|
Definition
| The period of time during which at least one of a firm’s inputs is fixed. |
|
|
Term
|
Definition
| The period of time in which a firm can vary all its inputs, adopt new technology, and increase or decrease the size of its physical plant. |
|
|
Term
|
Definition
| A cost that involves spending money/ A nonmonetary opportunity cost. |
|
|
Term
|
Definition
| The relationship between the inputs employed by a firm and the maximum output it can produce with those inputs. |
|
|
Term
| Law of Diminishing Returns |
|
Definition
| The principle that, at some point, adding more of a variable input, such as labor, to the same amount of a fixed input, such as capital, will cause the marginal product of the variable input to decline. |
|
|
Term
| Long-run Average Cost Curve |
|
Definition
| A curve showing the lowest cost at which a firm is able to produce a given quantity of output in the long run, when no inputs are fixed. |
|
|
Term
|
Definition
| The situation when a firm’s long-run average costs fall as it increases output. |
|
|
Term
|
Definition
| The situation when a firm’s long-run average costs rise as the firm increases output. |
|
|
Term
| Perfectively Competitive Market |
|
Definition
| A market that meets the conditions of (1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market. |
|
|
Term
|
Definition
| The minimum point on a firm’s average variable cost curve; if the price falls below this point, the firm shuts down production in the short run. |
|
|
Term
| Long-run Competitive Equilibrium |
|
Definition
| The situation in which the entry and exit of firms has resulted in the typical firm breaking even. |
|
|
Term
|
Definition
| The situation in which a good or service is produced at the lowest possible cost. |
|
|
Term
|
Definition
| A market structure in which barriers to entry are low and many firms compete by selling similar, but not identical, products. |
|
|
Term
| Monopolistic vs. Perfect Competition |
|
Definition
in long-run equilibrium, both firms earn zero economic profits.
• Monopolistically competitive firms charge a price
greater than marginal cost.
• Monopolistically competitive firms do not produce at minimum average total cost. |
|
|
Term
|
Definition
| A market structure in which a small number of interdependent firms compete. |
|
|
Term
|
Definition
The study of how people make
decisions in situations in which attaining their
goals depends on their interactions with
others; in economics, the study of the
decisions of firms in industries where the
profits of each firm depend on its interactions
with other firms. |
|
|
Term
|
Definition
An agreement among firms to charge the same
price or otherwise not to compete. |
|
|
Term
|
Definition
| A strategy that is the best for a firm, no matter what strategies other firms use. |
|
|
Term
|
Definition
A situation in which each firm chooses the
best strategy, given the strategies chosen by other firms. |
|
|
Term
|
Definition
An equilibrium in a game in which players cooperate to increase their
mutual payoff. |
|
|
Term
| Noncooperative Equilibrium |
|
Definition
| An equilibrium in a game in which players do not cooperate but pursue their own self-interest. |
|
|
Term
|
Definition
| A game in which pursuing dominant strategies results in noncooperation that leaves everyone worse off. |
|
|
Term
|
Definition
A group of firms that collude by agreeing
to restrict output to increase prices and profits. |
|
|
Term
|
Definition
| A firm that is the only seller of a good or service that does not have a close substitute. |
|
|
Term
|
Definition
The situation where the usefulness of a product
increases with the number of consumers
who use it. |
|
|
Term
|
Definition
1 Monopoly causes a reduction in consumer
surplus.
2 Monopoly causes an increase in producer
surplus.
3 Monopoly causes a deadweight loss, which
represents a reduction in economic efficiency. |
|
|
Term
|
Definition
| A merger between firms in the same industry. |
|
|
Term
|
Definition
| A merger between firms at different stages of production of a good. |
|
|
