Term
| why do some professors give frequent quizzes? |
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Definition
| to ensure attendance they give quizzes because there is a marginal cost if you don't attend. |
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Term
| What are the two "true costs"? |
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Definition
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Term
what is a fixed cost?
->two examples |
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Definition
costs that do not vary with level of business.
ex. rent, insurance (monthly payments) |
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Term
What is a variable cost?
-> one example |
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Definition
costs that vary with level of business.
ex. wages of assembly workers |
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Term
| What is an implicit cost? |
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Definition
| cost of using your own resources |
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Term
| What is an explicit cost? |
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Definition
| costs that involve monetary payments |
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Term
| Nature/Characteristics of Pure Competition (4) |
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Definition
1. Lrg # of firms with small sizes
2. Selling P is determined by MKT.
3. Sell identical products
4. Easy entry & easy exit |
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Term
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Definition
| MKT power refers to the ability to influence MKT p of a product |
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Term
| Who has MKT power (p takers or p searchers)? |
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Definition
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Term
| What are the two sources of MKT power? |
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Definition
1. Product Differentiation
2. Controlling LRG shares of supply |
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Term
Four ways to differentiate a product
D.U.A.L |
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Definition
D- difference in design (material)
U- unique features (rolls royce)
A- advertising (aflac)
L- location (unique, convenient) |
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Term
| Example of Pure Competition Firm |
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Definition
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Term
| Example of Monopolistic Comp. Firm |
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Definition
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Term
| Example of Oligopoly Firm |
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Definition
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Term
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Definition
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Term
| 3 Tactics Oligopolists use to avoid price competition. |
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Definition
1. Collusion
2. P leadership
3. Conscious Parellelism |
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Term
In oligopolists tactics, what is collusion?
An example of collsuion? |
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Definition
agreement among sellers to fix prices
ex. Cartels |
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Term
| In oligopolists tactics, what is P leadership? |
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Definition
| game of follow the leader, all firms folllow p raise |
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Term
In oligopolists tactics, what is conscious parellelism?
2 examples. |
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Definition
A situation in which they adopt similar policies w/o discussion.
a. firms provide same discounts to LRG buyers like walmart
b. all firms raise p at same time of yr like airlines. |
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Term
| What is Allocative Efficiency? |
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Definition
| production of most desired good in proper quantity up to where MSB=MSC |
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Term
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Definition
| the cost of producing an additional unit of output |
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Term
What is short-run cost of production?
+ one example |
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Definition
time period in which at least one input can't be changed.
ex. capital (1-6 months) |
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Term
What is Long-Run?
+ one ex. |
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Definition
time long enough for all inputs to be varied
ex. nothing is fixed in the long run |
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Term
| fixed cost + variable cost= _______ |
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Definition
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Term
| when you divide TC, FC, and VC by Q you can get __________. |
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Definition
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Term
to find TC, you can:
a.__________
b.__________ |
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Definition
a. multiply TC by Q
b. add FC and VC |
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Term
| What is Marginal Revenue? |
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Definition
| additional revenue firm gets from selling a unit of output |
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Term
| to find the sale profit, you have to subtract _ from __ |
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Definition
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Term
| When MR<MC, you have to ________ output |
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Definition
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Term
What does it mean when MR=MC for a firm?
What happens to production? |
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Definition
| It means they are at profit max. level and all production is stopped. |
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Term
| When MR>MC, the firm has to _______ output to ensure profit max. |
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Definition
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Term
| Profit max. point for Purely Competitive firms is where ____ meets _____ |
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Definition
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Term
| What is Production Efficiency |
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Definition
| When a firm produces at min. ATC |
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Term
| When finding loss, profit, and normal profit, TR=____ |
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Definition
| Price(of item) x Q (# sold) |
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Term
| When finding loss, profit, and normal profit, TC= _____ |
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Definition
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Term
Econ Profit:
TR is < or > then TC
P is > or < then ATC |
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Definition
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Term
| Definition for Econ loss/ profit, and normal profit. |
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Definition
Econ loss- revenue below a normal profit
Econ Profit- Revenue above a normal profit
Normal Profit- breaking even, no profit or loss |
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Term
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Definition
| group of producers acting together to control output/ suppl as well as price |
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Term
| The profit max. rule for P searchers: |
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Definition
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Term
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Definition
| industry dominated by a few relatively LRG sellers that are protected by entry barriers. |
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Term
2 distinguishing features of oligopoly.
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Definition
a. considers reactions of rivals before changing P
b. P competition among themselves. (coke, pepsi) |
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