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Definition
| All things that you give up to get something. |
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Term
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Definition
| Costs that require an outlay of money by the firm. (paying workers, rent etc...) |
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Term
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Definition
| Costs that don't require an outlaying of money. These are like the opportunity cost of what you're doing... You could making x dollars doing something else. |
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Definition
| Total Revenue minus total costs. (including implicit costs) |
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Definition
| Total revenue minus explicit costs. (stuff thats on the books) |
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Definition
| Costs that don't change with the quantity of output produced. |
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Definition
| Costs that do vary with the quantity of output produced. (workers, ingredients, raw materials, etc...) |
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Definition
| The market value of all the inputs that a firm uses in production. |
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Definition
| Fixed cost divided by quantity of output. (generally goes down) |
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Definition
| The Variable cost divided by the quantity of output. (Usually curves down) |
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Definition
| Total cost over quantity of output. Slopes down when marginal cost is lower and up when marginal cost is higher. (bottom of "U" is the Efficient Scale) |
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Term
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Definition
| The bottom of the U shaped ATC curve where ATC meets MC. This is the most efficient place for the firm to produce at because it costs the least per product. |
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Definition
| The increase in total cost that arises from making one more unit of a good. |
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Definition
| A market in which one firm cannot influence market prices. |
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Term
| 2 Characteristics of a Competitive Market |
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Definition
There are many buyers and many sellers
The goods offered by these sellers are largely the same |
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Term
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Definition
| Total Revenue divided by quantity sold. Average revenue equals the price of the good. |
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Term
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Definition
| The change in total revenue from an additional unit sold. Marginal revenue equals the price of the good. |
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Term
| If marginal revenue is greater than marginal cost the firm should... |
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Definition
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Term
| Profit-Maximizing Level of Output |
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Definition
| Marginal Revenue-Marginal Cost |
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Term
| In essence because the firm's marginal cost curve determines the quantity of the good the firm is willing to supply at any price. |
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Definition
| The marginal cost-curve is that firms supply curve. |
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Term
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Definition
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Term
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Definition
| A cost that has been committed and cannot be recovered. |
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Term
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Definition
| If the revenue it would get from producing is less than its total costs. |
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Term
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Definition
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Term
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Definition
TR-TC
(TR/Q-TC/Q) * Q
(P-ATC) * Q |
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Term
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Definition
| If ATC curve falls below P line... The rectangular box defined by the profit maximizing quantity, and its intercepts on P and ATC is profit |
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Term
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Definition
| If ATC curve falls aboe P line... The rectangular box defined by the profit maximizing quantity, and its intercepts on P and ATC is loss |
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Term
| Profit Maximization in a Monopoly |
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Definition
| Intersection of Marginal Revenue and Cost |
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Term
| Monopoly Marginal Revenue in Relation to Price |
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Definition
| Marginal revenue is always less thanprice |
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Term
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Definition
| A monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms. |
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Term
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Definition
| A firm that is the sole seller of a product with out close substitutes |
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Term
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Definition
Monopoly Resources: Ownership of key resource
Government Regulation: Government gives right to one firm
The Production Process: A single firm can produce at a lower output cost than a large number of firms. |
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Term
| Price in competitive vs Monopolized Markets |
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Definition
Price equals marginal cost in a competitive
Price exceeds marginal cost in monopoly |
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Term
| Monopoly Profit on a graph |
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Definition
[image]
The area of a box made of a line through the profit maximization point that goes from demand to average total cost... Than to the left from where these points meet |
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Term
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Definition
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Term
| Social Efficiency Quantity |
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Definition
| Where demand and marginal cost intersect |
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Term
| Monopolist and Social Efficient Quantity of Output |
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Definition
| Monopolists produce less than the socially efficient quantity of output because this makes them the biggest profit. |
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Term
| Deadweight Loss in Monopolies |
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Definition
[image]
The triangle between where the monopolist produces and the socially efficient quantity of output |
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Term
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Definition
| The business practice of selling the same product at different prices to different customers. |
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Term
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Definition
| Buying a good at a low price in one market and selling it at a higher price in a different market. |
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Term
| Perfect Price Discrimination |
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Definition
| A situation in wich the monopolists knows exactly the willingness to pay of each customer and can charge each customer a different price. |
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Term
| Monopolist with Single Price VS Price Discrimination |
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Definition
[image]
Different prices has no consumer surplus but no deadweight loss |
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Term
| Comparing and Contrasting Monopolies and Competitive Markets |
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Definition
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Term
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Definition
| A market structure in which only a few sellers offer similar or identical products. |
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Term
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Definition
| A market structure in which many firms sell products that are similar but not identical. |
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Term
| Characteristics of Monopolistic Competition |
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Definition
Many Sellers
Product Differentiation (each product is slightly different)
Free entry and exit |
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Term
| Examples of Monopolistically Competitive Markets |
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Definition
| CDs, Movies, Games, Restaurants, Books, Cookies, Furniture... etc... |
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Term
| The Four Types of Market Structure |
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Definition
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Term
| Demand Curve of a Firm in a Perfectly Competitive Market |
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Definition
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Term
| Monopolistic Competition in the Long Run |
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Definition
[image]
with entry and exit demand is eventually driven to equilibrium and zero economic profit where demand is tangent to ATC |
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Term
| Marginal Cost Monopolistic Competition |
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Definition
| Price exceeds marginal cost |
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Term
| The Product Variety Externality |
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Definition
| A positive externality created by the introduction o a new product or new firm. |
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Term
The Business-Stealing Externality
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Definition
| Entry of a new firm creates a negative externality on existing firms. |
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Term
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Definition
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Term
| Profit After Entry and Exit |
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Definition
| After entry and exit of a market has run its course economic profit should be zero. |
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Term
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Definition
| The production point with the lowest Average Total Cost |
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Term
| Long Run Equilibrium in a Competitive Market |
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Definition
| Eventually firms operate at their efficient scale. |
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Term
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Definition
| The company is still making money because economic profit takes into account the opportunity cost of doing other things. |
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Term
| Zero Economic Profit Example |
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Definition
Farmer
A farmer puts down 1 million to start a farm. He could have deposited the money and made 50,000 a year or gotten a job for 30,000. So this 80,000 of implicit cost is economic loss. So if the farmer makes 1.08 million he will make zero economic profit even though he gained 80,000 dollars. |
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Term
| Short Run Increase in Demand Graph |
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Definition
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Term
| Explanation of Short Run Increase in Demand |
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Definition
| Entry and Exit of a market happens in the long run. So if something's increase occurs quickly (Oprah, health benefits etc...) the demand curve shifts right in response to greater demand. The firms will produce at a higher point on their supply curve for a higher price. In the long run more firms will enter and produce more so price will be lowered. Afterwards you'll have an increase in supply and the same price. |
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Term
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Definition
| The long run supply curve is usually more elastic because of entry and exit. It has more time to respond to change in demand. |
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Term
| Economic Profit VS Accountant Profit |
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Definition
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Term
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Definition
| The amount a firm receives for the sale of its output. |
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Term
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Definition
| THe market value of the inputs a firm uses in production. |
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Term
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Definition
| Total revenue minus total cost. |
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Term
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Definition
Total revenue minus total cost, including both explicit and implicit costs.
TR - TC = EP
TR - (EC +IC) = EP |
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Term
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Definition
| Total revenue minus total EXPLICIT cost. |
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Term
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Definition
| The relationship between the quantity of inputs used to make a good and the quantity of output of that good. |
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Term
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Definition
| THe increase in output that arises from an additional unit of input. |
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Term
| Marginal Cost as relative to Average Total Cost |
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Definition
| Whenever marginal cost is less than average total cost the average total cost is falling. Whenever marginal cost is greater than average total cost the average total cost is rising. |
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Term
| Marginal Cost Crossing Average Total Cost Curve |
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Definition
| The Marginal Cost Curve crosses the ATC curve at the lowest point. Because marginal cost drags it down when below and pulls it up when above. |
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Term
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Definition
| The property whereby long-run average total cost falls as the quantity of output increases. |
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Term
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Definition
| The property whereby long-run average total cost rises as the quantity of output increases. |
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Term
| Constant Returns to Scale |
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Definition
| THe property whereby long-run average total cost stays the same as the quantity of output changes. |
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Term
| Reasons for economies of scale |
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Definition
| Higher production levels allow specialization where workers can become better at a specific task. |
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Term
| Reasons for Diseconomies of Scale |
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Definition
| Diseconomies of scale come from coordination problems that arise as an organization gets bigger. |
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Term
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Definition
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Term
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Definition
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Term
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Definition
| The fall in total surplus that comes from a market distortion. (Taxes, Monopoly etc...) |
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Term
| Why Taxes create Deadweight Loss |
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Definition
| Taxes cause deadweight loss because they prevent buyers and sellers from realizing some of the gains from trade. Also people respond to incentives so people will buy at a point on the demand curve to the left of equilibrium. |
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Term
| Elasticity and Deadweight Loss |
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Definition
| More elasticity makes more deadweight loss.[image] |
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Term
Tax Size and Its Effects
(Laffer Curve) |
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Definition
A tax thats too large will make the same revenue as a tax that is proportionally too small.
[image] |
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Term
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Definition
Reaganomics and SHIT
Basically high taxes discourage hard work so lowering taxes would create increased productivity and a more productive economy. |
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Term
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Definition
| The maximum amount that a buyer will pay for a good |
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Term
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Definition
| The amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. |
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Term
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Definition
| The area below the demand curve and above the price measures the consumer surplus in a market. |
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Term
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Definition
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Term
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Definition
| The value of everything a seller must give up to produce a good. |
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Term
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Definition
| The amount a seller is paid for a good minus the seller's cost of producing it. |
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Term
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Definition
| The area below the price and above the supply curve.[image] |
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Term
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Definition
| Value to Sellers - Cost to Producers |
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Term
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Definition
| The property of a resource allocation of maximizing the total surplus received by all members of society. |
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Term
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Definition
| The property of distributing economic prosperity uniformly among the members of society. |
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Term
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Definition
| The ability to influence prices. This is inefficient because it keeps the price and quantity away from equilibrium. |
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Term
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Definition
| An outside force that causes change in demand or supply. |
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Term
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Definition
The inability of some unregulated markets to allocate resources efficiently.
Externalities and Market Power are examples. |
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