Economics Production, Perfect Competition, Pure Monopoly, Oligopoly
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 resource.
Diminishing Marginal Returns
A characteristic of production whereby the marginal product of the next unit of variable resource utilized is less than that of the previous variable resource.
zero
A company can break even and meet operating costs without a loss when it earns __________________ economic profit
oligiopoly
A market structure characterized by a few large producers, or either standardized or differentiated products, operating in industries with extensive barriers. These producers are price makers and behave strategically when making decisions related to the features, prices, and advertising of their products.
fixed
A perfectly competitive firm will incur its total ____________________ cost of production when it shuts down temporarily in the short run
marginal revenue equals marginal cost
A profit maximizing form should produce a level of output where:
mutual interdependence
A situation in which a change in strategy followed by one producer will likely affect the sales, profits, and behavior of another product.
Collusion
A situation in which decision makers coordinate their actions to achieve a desired outcome. Collusion is generally used to achieve an outcome that would not be possible in the absence of coordinated actions, and it is typically associated with legal or anti competitive behaviors
decrease
As the market prices decreases, all else held constant, a profit-maximizing firm can _______________ its production.
amount of revenue per unit of a product sold
Average revenue is the:
patents, control of resources needed to produce output, pricing strategies, significant cost of capital, economies of scale that may allow only a small number of firms to operate in a market
Barriers present in oligopolisitc markets:
differentiated, price
Because the products of monopolistically competitive firms are ________________________ from other companies in their industry, these firms are able to have some control over the _____________ of their products.
Variable Costs
Costs that change with the amount of output produced, increasing as production increases and decreasing as production decreases.
output
Costs that do not change with the amount of _______________ produced are fixed cost
total revenue minus economic costs
Economic profit equals
the marginal revenue, the marginal cost
In making a decision about how much output it should produce to maximize its profits, which two pieces of information does a firm need.
The extra benefit of producing an additional unit of output; the extra cost associated with producing an additional unit of output
In making a decision about how much output it should produce to maximize its profits, which two pieces of information does a firm need?
Explicit Costs
Monetary payments made by individuals, forms, and governments for the use of land, labor, capital, and entrepreneurial ability owned by others. Also known as accounting costs
not the same market structure
Monopolistic competition and monopoly are:
market inefficiencies
One of the roles of a government is to limit the market power of monopolies or even to eliminate them entirely due to:
economic profits
Positive _____________ profits encourage more firms to enter the market to produce goods and services
normal profits and even losses in the short run
Producers operating in oligopolistic markets generate:
equals
Profit maximization implies that perfectly competitive firms should expand production up to the point where marginal revenue _____________ marginal cost.
marginal product
The additional output produced as a result of utilizing one or more unit of available resource
average
The amount of revenue produced per unit of an output sold is the _______________ revenue.
marginal cost
The cost associated with an additional unit of output is called ________________.
Economic Costs
The cost associated with the use of resources; the sum of explicit and implicit costs
Normal Profit
The level of profit that occurs when total revenue is equal to total cost.
implicit costs
The opportunity cost of using owned resources are
perfect price discrimination, personal pricing, first-degree price discrimination
The pure monopoly extracts all surplus from consumers, yielding higher profits than any other pricing method when it employs....
law of diminishing marginal returns
The shape of the marginal cost curve is depended on the
product differentiation
The strategy of distinguishing one firm's product from the competent product of other firm.
Total Cost
The sum of fixed and variable costs of production
short run
The time period in which at least one input of production is fixed but other inputs can be charged
total product
The total amount of output produced with a given amount of resources is known as the ___________________.
average total cost
The total cost per unit is equal to:
Average Variable Cost
The total variable cost divided by the amount of output produced; variable cost per unit.
monopolistic competition
a market structure characterized by a large number of sellers producing differentiated products, for which they have some control over the price they charge, in a market with relatively easy market entry and exit is known as
entering; exiting
a perfectly competitive market is characterized by a large number of sellers producing a standardized product and taking the market price as given, with easy _________________ and ________________ into the market
monopoly
a pure _____________ is the only seller in a market
cost, revenue
all firms maximize products by producing the quantity of output at which the marginal _________ is equal to the marginal ________________
are designed to prevent firms from engaging in behaviors that would lessen competition
anti trust laws
differentiated, demand
because the products of monopolistically competative firms are ____________________ from other companies in their industry, the _______________ curve they face is downward sloping.
a pure monopoly
by charging consumers the highest price they are willing and able to pay, ______________________ extractors all surplus from consumers, yielding higher profits than any other pricing method available to the firm
marginal revenue
extra or additional revenue associated with the production of an additional unit of output is the
takers
firms that accept the market price and have no ability to influence that price are known as price __________________
the practice of charging the maximum possible price for each unit which enable the firm to capture maximum consumer surplus for itself, the practice of charging every consumer the price that she is willing and able to pay for something.
first degree price discrimination is
monopolistically
for __________________________ competitive firms, branding is important because many consumers do not like taking risks.
the monopoly had to lower the price on all units to sell more
for a monopoly, the marginal revenue is below the demand curve because
additional revenue associated with the sale of an additional unit of output
marginal revenue is the
a market with barriers to entry, a single seller, a good or service for which there are no close substitutes, a firm having significant price control
monopolies are characterized by
combine characteristics of competitive markets and pure monopolies
monopolistically competitive markets:
personal pricing, perfect price discrimination, first degree price discrimination
the practice of charging each and every consumer the price that she is willing and able to pay for a good or service describes
total revenue
the price of goods times the number of units sold gives us
a single firm, no real barriers of entry
what are the characteristics of a contestable firm
demand curve
when a pure monopoly practices first degree price discrimination, the ___________________________ becomes the marginal revenue curve
average fixed cost
The vertical distance between the average variable cost and the average total cost curves is equal to the
average fixed cost
Total fixed cost divided by the amount of output produced is equal to
average product
Total product divided by the number of units of a resource employed gives the ____________________ of the resource.
(average revenue minus average total cost) x output
Total profit equals
Accounting profit
Total revenue minus explicit costs of production
economic profit
Total revenue minus the explicit and implicit costs of production is
Large number of buyers and sellers, producers who are price takers, standardized product, easy entry and exit
What are the four characteristics of a perfectly competitive market?
the demand curve becomes the marginal revenue curve
When a pure monopoly practices first-degree price discrimination
the firm faces a lost
When the total revenue earned by a firm is less than total cost of production
negative
_________________ economic profits encourage firms to exit the market
normal profit
_________________ is also known as zero economic profit
normal profit
__________________ is also known as zero economic profit
price discrimination
__________________is the practice of selling the same good or service to different consumers a different prices
monopoly
for a profit-maximizing level of output, the price charged by a __________________ is not just different but greater than marginal revenue
branding
for monopolitically competitive firms, ________________ their products is important because many consumers do not like taking risks, and this why they can learn about their products before buying them
decrease
if a monopoly wants to sell more units, it must __________ the price for every unit it sells
availability of close substitutes
in a monopolistic competitive market, what consumer would be more responsive to price change?
identical
in a perfectly competitive market, we assume products are _______________ in the minds of consumers
producers may or may not even earn a profit
in an oligopoly
revenue; cost
profit equals total _____________ minus total _________________.
block pricing
second-degree price discrimination is also known as
average product
the amount of output produced per unit of resource employed is the
oligopolstic
the behavior followed by ________________________ firms needs to be strategic, given that they face other competitors in the market
market price
the demand for a perfectly competitive firm's product is a horizontal line originating at the _____________________
marginal revenue
the extra or additional revenue associated with the production of an additional unit of output
price discrimination
the practice of selling the same good or service to different consumers at different prices is called
true
there are important exceptions in which monopolies are actually encouraged to incentive positive outcomes
average revenue
total revenue divided by the number of units of a product sold is the _________________________.
marginal, average
when the _______________ cost is above the ______________ cost, the average cost should be increasing
marginal product
when the __________________ increases, the marginal cost of production declines
