Term
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Definition
| the firm can change output only within the constraints of an existing plant size |
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Term
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Definition
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Term
| according to the marginal decision rule, if the marginal cost of producing an additional unit output is greater than the marginal revenue of that unit |
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Definition
| the firm should not produce that unit of output |
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Term
| according to the law of decreasing returns, as more units of a variable input are added to a fixed input, the ______ of the variable input must eventually decline |
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Definition
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Term
| according to the marginal average rule, when marginal product rises above average product, |
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Definition
| it pulls the average product higher |
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Term
| formula for marginal product (MP) |
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Definition
| MP= (change in Q)/(change in labor(L)) |
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Term
| formula for average product (AP) |
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Definition
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Term
| formula for total cost (TC) |
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Definition
TC=TFC+TVC
ex: TC= 500+150L |
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Term
| formula for total variable cost (TVC) |
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Definition
say labor costs $100 per unit...then the formula would be 100L
-example: with 4 labor units, TVC would be 100(4)=400 |
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Term
| formula for average fixed cost (AFC) |
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Definition
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Term
| formula for average variable cost (AVC) |
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Definition
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Term
| formula for average total cost (ATC) |
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Definition
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Term
| formula for marginal cost (MC) |
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Definition
MC= (change in TC)/(change in Q)
or
MC= (price of labor)/(MP of labor) |
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Term
| marginal cost is minimized at the level where |
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Definition
| marginal product is maximized |
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Term
| the _____ determines the characteristics of the marginal cost, the average variable cost, and the average total cost curves |
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Definition
| law of decreasing returns |
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Term
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Definition
| all inputs and costs are variable |
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Term
| in the ____ run, firms have enough time to change their plant sizes, build new plants, close down old plants, and enter/ leave industries |
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Definition
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Term
| economists typically derive the firm's long run average cost (LRAC) curve as |
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Definition
| the least-cost segments of the ATC curves for all possible plant sizes |
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Term
| the firm is experiencing _____ in the output range from 0 to Q1 |
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Definition
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Term
| under competitive conditions, this firm can/cannot expect to survive operating at an output level below Q1. |
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Definition
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Term
| we would expect to find ____ firms in an industry characterized by minimum efficient scale (MES) at a low output level immediately followed by diseconomies of scale. |
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Definition
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Term
| besides the location of MES, what other factors may explain the size and number of firms in an industry? |
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Definition
-marketing expertise
-firm goodwill
-consumer convenience |
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Term
| what are the competitive factors used to define market types? |
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Definition
-# of firms in industry
-similarity of firms' products
-ease of market entry/exit |
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Term
| which market structure is least competitive? |
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Definition
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Term
| Automobile manufacturing is an example of what? |
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Definition
| an oligopolistic industry |
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Term
| which market structure is characterized by a very large number of sellers, a homogeneous product, and easy market entry/exit? |
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Definition
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Term
| economists refer to the perfectly competitive firm as a |
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Definition
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Term
| for the individual perf. comp. firm, price |
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Definition
| is constant for all output levels |
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Term
| under perfect competition, price |
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Definition
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Term
| the perf. comp. firm maximizes profits/minimizes losses by producing at the output level where |
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Definition
| price equals marginal cost, provided that price is greater than average variable cost |
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Term
| Assume a perfectly competitive firm is producing 1,000 units of output at a price of $10 per unit. At this output level, marginal cost equals $10, average variable cost equals $6, and average total cost equals $8. This firm |
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Definition
is maximizing profit at 1,000 units of output, because P>AVC and P>ATC
(when P>ATC, you have profit) |
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Term
| The perfectly competitive firm's short run supply curve equals |
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Definition
| its marginal cost curve for all prices greater than average variable cost |
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Term
| the perf. competitive market short run supply curve equals |
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Definition
| the sum of the marginal cost curves of all firms in that market |
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Term
| which of the following items represents a condition for long run equilibrium for perf. comp. firm and market? |
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Definition
| the typical firm earns zero profit (P=ATC) |
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Term
| Assume a perfectly competitive market and firm are operating under conditions of long-run equilibrium. If the demand for the good or service produced in this market increases, which of the following adjustments will occur in the short run? |
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Definition
-market prices will increase
-firm and market output with increase |
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Term
| After all of the short-run adjustments implied by the question above occur, which of the following adjustments will occur in the long run? |
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Definition
-firms will enter the market
-market supply will increase |
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Term
| Assuming the market described in the previous two previous questions represents a decreasing cost industry, the new long-run equilibrium price will be |
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Definition
| less than the original long run equilibrium price |
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Term
| the long run supply curve that slopes upward is |
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Definition
| an increasing cost industry |
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Term
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Definition
| the perfectly competitive firm operates at the minimum point on its average total cost curve at long run equilibrium |
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Term
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Definition
| the perf. comp. firm produces at the output level where price equals marginal cost, provided price exceeds average variable cost |
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Term
| formula for marginal revenue (MR) |
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Definition
| MR= (change in TR)/(change in Q) |
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Term
| formula for total revenue (TR) |
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Definition
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Term
| formula for revenue per unit of output |
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Definition
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Term
| formula for variable cost per unit of output |
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Definition
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