Econ Exam 3

diseconomies of scale

a condition in which the long-run average total cost of production increases as production increases

constant returns to scale

a condition in which the long-run average total cost of production remains constant as production increases

price discrimination in context

Bc of Price Discrimination, odds are that the last time you flew on an airplane, the person in the seat right next to you paid a different price for her seat than you did for yours

productive efficiency

Producing output at the lowest possible average total cost of production; using the fewest resources possible to produce a good or service

long-run average total cost curve (LRATC)

a curve showing the lowest average total cost possible for any given level of output when all inputs of production are variable

the shape of the long-run average total cost curve can differ for different types of firms, depending on:

how much production it takes to reach the minimum long-run average total cost

a pure monopoly is a price BLANK engaging in non price competition

maker

economic costs

the cost associated with the use of resources; the sum of explicit and implicit costs

average revenue

Revenue per unit sold, equal to total revenue divided by the quantity of output produced and sold

increasing marginal returns

a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is greater than that of the previous variable resource

increasing marginal revenue

a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is greater than that of the previous variable resource

diminishing marginal returns

a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is less than that of the previous variable resource

economies of scale

a condition in which the long-run average total cost of production decreases as production increases

short-run average total cost curve (ATC)

a curve showing the average total cost for different levels of output when at least one input of production is fixed, typically plant capacity

monopoly

a market structure characterized by a single seller, producing a good or service for which there are no close substitutes, in a market with barriers to enter. A monopoly is a price maker

perfect competition

a market structure characterized by the interaction of large numbers of buyers and sellers, in which the sellers produce a standardized, or homogeneous, product. These sellers are price takers, can sell as much output as they choose to produce at the market price, and have the ability to easy enter or exit the industry.

long-run

a period of time in which all inputs or production are variable

short run

a point of time in which at least one input of production is fixed

short-run supply curve

a supply curve that represents the short-run relationship between price and quantity supplied. For a perfectly competitive firm, the portion of the marginal cost curve that is at or above the minimum point of the average variable cost curve.

explicit costs are also known as

accounting costs

total product

amount of output produced with a given amount of resources

barriers to entry

any impediments that prevent firms from entering a market or industry

short run

at least one input of production is fixed

average product

average amount of output produced per unit of a resource employed; total product divided by the number of units of a resource employed

declines as output increases Distance between AVC and ATC get smaller as output is produced, this is called:

average fixed cost

Marginal cost

can only equal the average cost when when the marginal cost is rising will cause the average cost to rise only if the marginal cost is rising

variable costs

costs that change with the amount of output produced, increasing as production increases and decreasing as production decreases

fixed costs

costs that do not change with the amount of output produced

Zero BLANK profit is the revenue needed for a company to break even and meet operating costs without a loss

economic

when the marginal product increases, the marginal cost of production:

falls

price takers

firms that take or accept the market price and have no ability to influence that price.

total cost

fixed costs + variable costs (of production)

long-run equilibrium

market condition in which firms do not face incentives to exit or enter the market and firms earn a normal profit. Generally, it occurs when the market price is equal to the minimum average total cost faced by firms.

explicit costs

monetary payments made by individuals, firms, and governments for the use of land, labor, capital and entrepreneurial ability owned by others. Also known as "accounting costs"

productive efficiency

producing output at the lowest possible average total cost of production; using the fewest resources possible to produce a good or service

allocative efficiency

producing the goods and services that are most wanted by consumers in such a way that their marginal benefit equals their marginal cost

Economics of scale can result from:

productivity gains from more specialized labor lower costs of inputs as firms purchase larger quantities

monopoly power

the ability of a monopoly to influence prices by controlling the quantities that it produces in the market

marginal product

the additional output produced as a result of utilizing 1 more unit of a variable resources (i.e., labor or capital)

average product

the average amount of output produced per unit of a resource employed; total product divided by the number of units of a resource employed

marginal revenue

the change in a firms total revenue that results from a 1-unit change in output produced and sold

normal profit

the level of profit that occurs when total revenue is equal to total cost. This level indicates that a firm is doing just as well as it would have if it had chosen to use its resources to produce a different product or compete in a different industry. Normal profit is also known as zero economic profit.

loss

the level of profit that occurs when total revenue is less than total cost

minimum efficiency scale

the lowest level of output at which the long-run average total cost is minimized

implicit costs

the opportunity cost of using owned resources; cost for which no monetary payment is explicitly made

price discrimination

the practice of selling the same good or service to different consumers at different prices

shutdown point

the price below which a firm will choose not to operate in the short run. Numerically, this point occurs when marginal revenue equals marginal cost at the minimum average variable cost. Graphically, this point occurs where the price, or marginal revenue curve, intersects the marginal cost curve at the minimum point of the average variable cost curve (AVC).

total product

the total amount of output produced with a given amount of resources

deadweight loss

the value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium

average total cost

total cost divided by the amount of output produced; total cost per unit

average fixed cost

total fixed cost divided by the amount of output produced; fixed cot per unit

economic profit

total revenue - economic costs, which include both explicit and implicit costs of production

accounting profit

total revenue - explicit cost of production

average variable cost

total variable cost divided by the amount of output produced; variable cost per unit