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Economics Midterm
Ch. 11
13
Economics
Undergraduate 3
10/24/2008

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Term
Perfectly 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
Price taker
Definition
A buyer or seller that is unable to affect the market price.
Term
Profit
Definition
Total revenue minus total cost.
Term
Average revenue (AR)
Definition
Total revenue divided by the quantity of the product sold.
Term
Marginal revenue (MR)
Definition
Change in total revenue from selling one more unit of a product.
Term
Sunk cost
Definition
A cost that has already been paid that cannot be recovered.
Term
Shutdown point
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
Economic profit
Definition
A firm's revenue minus all its costs, implicit and explicit.
Term
Economic loss
Definition
The situation in which a firm's total revenue is less than its total cost, including all implicit costs.
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
Long-run supply curve
Definition
A curve that shows the relationship in the long run between market price and the quantity supplied.
Term
Productive efficiency
Definition
The situation in which a good or service is produced at the lowest possible cost.
Term
Allocative efficiency
Definition
A state of the economy in which production represents consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit equal to the marginal cost of producing it.
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