Chapter 13

When MC=ATC

ATC is constant

WHEN MC< ATC

ATC is falling

When MC>ATC

ATC is rising

Monopolistic Competition

a market structure in which many firms sell products that are similar but not identical

Fixed Costs (FC)

are costs that do not vary with the quantity of output produced.

Variable costs (VC)

are costs that do vary with the quantity of output produced.

Implicit Cost

are input costs that do not require an outlay of money by the firm.

Explicit Cost

are input costs that require an outlay of money by the firm.

Economics of Scale

are the property whereby long-run average total cost falls as the quantity of output increases.

Disceconimics of Scale

are the property whereby long-run average total cost rises as the quantity of output increases

Efficient Scale

e is the level of output at which long-run average cost reaches its lowest level.

Total Costs (TC)

equal the sum of fixed costs and variable costs.

Accounting Profit

equals total revenue minus explicit costs.

Economic Profit

equals total revenue minus total cost, including both explicit and implicit costs.

Monopoly

firm that is the sole seller of a product without close substitutes

Average Fixed Cost (AFC)

fixed cost divided by the quantity of output.

Oligopoly

is a market structure in which only a few sellers offer similar or identical products

Marginal Cost

is the increase in total cost that arises from an extra unit of production.

Constant Returns to Scale

is the property whereby long-run average total cost stays the same as the quantity of output increases.

Average Variable Cost (AVC)

is variable cost divided by the quantity of output.s fixed cost divided by the quantity of output.

Competitive Market

market with many buyers and sellers trading identical products so that each buyer and seller is a price taker.

Short Run

refers to a period of time over which people cannot fully adjust their behavior to a change in conditions. Applied to a business firm, the short run refers to a period of time over which the firm cannot vary the quantities of all its inputs, though it may be able to change the quantities of some inputs.

Long Run

refers to a period of time over which people fully adjust their behavior to a change in conditions. Applied to a business firm, the long run refers to a period of time over which the firm can change the quantities of all inputs.

Marginal Change

to describe small incremental adjustments to a plan of action.