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Definition
| Expenditures that must be made before production starts and that do not change regardless of the level of production. |
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Definition
| Costs of production that increase with the quantity produced. |
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Term
| Law of diminishing returns |
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Definition
| aka diminishing marginal returns: when the marginal gain in output diminshes as each additional unit of input is added. |
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Term
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Definition
| Total cost divided by the quantity of output. |
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Term
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Definition
| The additional cost of producing one more unit. |
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Term
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Definition
| When the average cost of producing each individual unit declines as total output increases. |
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Term
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Definition
| A firm in a perfectly competitive market that must take the prevailing market price as given. |
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Term
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Definition
| Each firm faces many competitiors that sell identical products. |
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Term
| Conditions of perfectly competitive markets |
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Definition
| seek to have profits at highest, if no high profit. They seek to find where losses are smallest.React to increase in profit by increasing production and to losse by reducing production or shutting down. |
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Term
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Definition
| When the revenue a firm receives does not cover its average variable costs, the firm should shut down immediately; the point where the marginal cost curve crosses the average variable cost curve. |
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Term
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Definition
| occurs because the entry of new firms, prompted by an increase in demand, causes the long-run average cost curve of each firm to shift upward, which increases the minimum efficient scale of production |
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Term
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Definition
| occurs because the entry of new firms, prompted by an increase in demand, causes the long-run average cost curve of each firm to shift downward, which decreases the minimum efficient scale of production. |
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Term
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Definition
| The long-run process of firms beginning and expanding production in response to a sustained pattern of profits. |
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Term
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Definition
| The long-run process of firms reducing production and shutting down in response to a sustained pattern of losses. |
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Term
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Definition
| Total revenues minus the firm's costs, without taking opportunity cost into account. |
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Term
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Definition
| Total revenues minus all of the firm's costs, including opportunity costs. |
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Term
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Definition
| aka Marginal Revenue Product: reveals how much revenue a firm could receive from hiring an additional worker and selling the output of that worker. |
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Term
| Efficiency in perfectly competitive markets |
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Definition
productive efficiency: producing without waste, so that the choice is on the frontier of the production possibility frontier.
allocative efficiency: among the points on the production possibility frontier, the point that is chosen is socially preferred -- at least in a particular and specific sense. |
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Term
| Three types of imperfect competition |
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Definition
1. monopoly: a firm that faces no competitors.
2. monopolistic competition: many firms competing to sell similar but differentiated products.
3. oligopoly: when several large firms have all or most of the sales in an industry. |
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Term
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Definition
| when the quantity demanded in the market is less than the quantity at the bottom of the long-run average cost curve. |
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Term
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Definition
| when an existing firm uses sharp but temprary price cuts to discourage new competition. |
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Term
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Definition
| the legal, technological, or market forces that may discourage or prevent potential competition from entering a market. |
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Term
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Definition
| many firms competing to sell similar but differentiated products. |
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Term
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Definition
| When firms act together to reduce output and keep prices high. |
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Term
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Definition
| A group of firms that collude to produce the monopoly outputand sell at the monopoly price. |
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