Econ 200

Front 1

explicit costs

Back 1

input costs that pay for materials and human/machine to make product

Front 2

implicit costs

Back 2

input costs that do not go into the product being made ex:rent

Front 3

Economic profit

Back 3

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

Front 4

Accounting profit

Back 4

equals total revenue minus explicit costs.

Front 5

long run

Back 5

refers to a period of time over which people fully adjust their behavior to a change in conditions. Applied to a business firm, refers to changing quantities of all imputs over time

Front 6

short run

Back 6

cannot fully adjust their quantity inputs to a changed market

Front 7

Fixed costs

Back 7

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

Front 8

Variable costs

Back 8

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

Front 9

Economies of scale

Back 9

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

Front 10

Diseconomies of scale

Back 10

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

Front 11

Constant returns to scale

Back 11

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

Front 12

efficient scale

Back 12

a firms level of output at
which long-run average cost reaches its lowest level

Front 13

price taker

Back 13

a firm that cannot influence the market price because its production is an insignificant part of the total market

Front 14

Competitive market

Back 14

•Many buyers and sellers
•Goods offered by the various sellers are largitely the same
•Firms can freely enter or exit the market in the long run

Front 15

Profit maximization in the short run under perfect competition

Back 15

Find quantity where price = MC
Shutdown: quantity=0

Front 16

Short run supply curve

Back 16

firms short run supply curve under perfect competition begins where marginal costs intersect average variable cost.

Front 17

Long run

Back 17

profits are 0.

Front 18

single-price monopoly

Back 18

a firm that sells each unit of its output for the same price to all its customers.

Front 19

price discrimination

Back 19

when it sells different units of a good or service for different prices.

Front 20

Profit maximization

Back 20

Perfect Competition
P = MR = MC
Monopoly
P > MR = MC

Front 21

two-part tariff

Back 21

is a pricing system under which a consumer first pays a lump sum for the right to purchase a good, and then pays a price for each unit of the good actually purchased.

Front 22

Oligopoly

Back 22

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

Front 23

Game theory

Back 23

is the study of how people behave in strategic situations

Front 24

A dominant strategy

Back 24

is a strategy that is best for a player in a game regardless of the strategies chosen by other players.

Front 25

A dominant strategy equilibrium

Back 25

equilibrium in which each player has a dominant strategy

Front 26

A Nash Equilibrium

Back 26

is a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all of the other actors have chosen.

Front 27

• Backward induction

Back 27

the technical term for “go to the end of the game and work backwards.”

Front 28

Subgame perfect Nash equilibrium

Back 28

outcome you will find when you “go to the end of the game and work backwards.

Front 29

production function

Back 29

the relationship between the quantity of inputs (in this case, labor) used to make a good and the quantity of output of that good.

Front 30

Marginal product of labor

Back 30

the increase in the amount of output from an additional unit of labor

Front 31

Marginal Revenue Product of Labor

Back 31

the marginal product of an input times the price of the output

Front 32

Profit Maximization in terms of hiring labor

Back 32

The cost of hiring another worker (wage) is measured in dollars=Benefit of hiring another worker measured in dollars

Front 33

Labor supply curve

Back 33

An increase in W
is an increase in the opp. cost of leisure.
A person will respond by taking less leisure and by working more

Front 34

Equilibrium in the labor market

Back 34

The aggregate labor demand curve is the horizontal sum of individual firms’ demand curves for labor.
The aggregate labor supply curve is the horizontal sum of individual workers’ labor supply curves.

Front 35

Labor Demand Shifters

Back 35

Technology (of production)
Output Price
Price of other inputs
Number of firms

Front 36

Labor Supply Shifters

Back 36

Size of the Labor Force
Preferences for work vs. leisure
Opportunities in other Labor Markets

Front 37

Poverty line

Back 37

an absolute level of income
set by the gov’t for each family size
below which a family is deemed to be in poverty

Front 38

Poverty rate

Back 38

the percentage of the population whose family income falls below the poverty line