Term
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Definition
| relationship between a producer's inputs and output |
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Term
| fixed input in the short run |
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Definition
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Term
| fixed input in the long run |
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Definition
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Term
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Definition
| can be varied in short run or long run |
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Term
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Definition
| shows how the quantity of output changes in relation to variable input with a given fixed input |
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Term
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Definition
| the increase of output generated by one more unit of input |
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Term
| diminishing returns to an input |
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Definition
| marginal product declines as more input is used |
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Term
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Definition
| shows total cost, is equal to the fixed cost + variable cost |
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Term
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Definition
| the increase in total cost due to producing one more unit of output |
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Term
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Definition
| total cost divided by the quantity produced |
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Term
| average total cost curves |
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Definition
| u shaped, average fixed cost plus average variable cost (diminishing returns, spreading effect) |
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Term
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Definition
| the lowest point on the atc curve, marginal cost curve crosses here |
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Term
| long-run average total cost curve |
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Definition
| shows the relationship between output and the average total cost when fixed cost changes |
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Term
| increasing returns to scale |
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Definition
| output increases and so do returns as long as lratc declines, helps form natural monopolies |
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Term
| decreasing returns to scale |
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Definition
| output increases but returns decrease, lratc is increasing |
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Term
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Definition
| cause of increasing returns to scale, oligopolies and cartels |
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Term
| perfectly competitive market |
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Definition
| producers and consumers are price takers, can't influence the price, small market shares, free entry and exit, standardized (undiversified) product |
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Term
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Definition
| means they buy and sell at the market price and have no control over it |
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Term
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Definition
| producers share of the market |
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Term
| standardized product/ comodity |
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Definition
| products that consumers view as equal (substitutes) |
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Term
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Definition
| anyone can join with little or no significant cost |
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Term
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Definition
| the additional benefit received from producing one more unit of product |
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Term
| principle of marginal analysis |
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Definition
| the optimal point of production is when marginal benefit is equal to marginal cost |
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Term
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Definition
| produce the quantity at which marginal revenue equals marginal cost (price-taking firms, mr=price) |
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Term
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Definition
| a horizontal line at the market price. chooses output according to the price-taking firms optimal output rule. |
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Term
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Definition
| produce at the quantity at which price equals marginal cost. (does not mean it's profitable) |
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Term
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Definition
| involves explicit and implicit costs |
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Term
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Definition
| involves only explicit costs |
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Term
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Definition
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Term
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Definition
| actual outlay and exchange of cash |
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Term
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Definition
| market price equals average total cost |
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Term
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Definition
| market price is lower that average variable cost |
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Term
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Definition
| fixed costs that have already been incurred and cannot be undone |
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Term
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Definition
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Term
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Definition
| market in which there is one sole provider of a good |
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Term
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Definition
| the ability to raise prices by reducing output |
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Term
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Definition
| reason other firms can't produce the same product (patents, copyrights, control of natural resources) |
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Term
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Definition
| develops due to increasing returns to scale |
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Term
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Definition
| good is supplied by the government |
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Term
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Definition
| price ceilings and floors |
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Term
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Definition
| only a few sellers of a product |
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Term
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Definition
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Term
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Definition
| one of two sellers of a product |
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Term
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Definition
| firms compete but also have market power |
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Term
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Definition
| setting output levels for each firm in order to increase price and revenue |
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Term
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Definition
| when firms form cartels and practice price fixing |
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Term
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Definition
| government policies designed to prevent collusion |
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Term
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Definition
| a market structure in which there are many competing producers with different products (free entry and exit in long run) |
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Term
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Definition
| caused when collusion breaks down |
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Term
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Definition
| products are different-classified by: style/type, location, quality |
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