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19 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Production |
The creation of any good or service that had value to either consumers or other producers |
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Production function |
A statement of the functional relationship inputs and outputs. It shows the maximum output that can be produced from given inputs |
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Short run |
Period of time where at least one input is fixed |
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Long run |
Period of time where all inputs are variable |
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Marginal product of labor |
The change in total product labor or output resulting from hiring one additional worker |
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Inflection point |
Identifies where total product labor stops increasing at an increasing rate and starts increasing at a decreasing rate. Denotes the beginning of diminishing returns. |
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Law of diminishing returns |
As successive units of a variable resource are added to a fixed resource, beyond some point the extra, or marginal output attributable to each additional unit of the variable resource will decline |
MP of an input declines as quantity of the input increases |
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Long run average cost |
Curve shows the least per unit cost at which any output can be produced after the firm has had time to make all appropriate adjustments in its plant size. It is composed of segments of the short run average total cost curves representing the various plant sizes a firm can construct in the long run. |
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Economics of scale |
The forces that reduce the average cost of producing a product at the firm expands the size of its plant (it's output) in the long run. |
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Diseconomics of scale |
The forces that increase the average cost of producing a product as the firm expands the size of its plant (it's output) in the long run |
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Minimum efficient scale |
The smallest scale of production for which long run average total cost is at a minimum |
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Natural monopoly |
A single firm in an industry in which average total cost is dueling over the entire range of production and the minimum efficient scale is larger than the size of the market |
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Monopoly - absolute or pure |
Exists when a single form is the sole producer of a product or provider of a service for which there is no close substitutes in an industry where entry is not possible |
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Monopolistic competition |
Market situation in which a relatively larger number of producers out suppliers are offering similar but not identical products |
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Product differentiation |
Physical and other differences between the products produced by different firms that result in individual buyers preferring (so long as the price changed by all sellers is the same) the product of one firm to the product of the other firms |
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Price discrimination |
The practice of changing different prices for different units of good |
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Excess capacity |
A situation in which a firm produces below the level that gives minimum average cost |
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Oligopoly |
A market in which a few firms sell either a standardized or differentiated product, into which entry is difficult, in which the forms control over there price at which it sells it's product is limited by mutual interdependence and in which there is typically a great deal of non price competition |
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Mutual interdependence |
Situation in which a change in price (or in some other policy) by one firm will affect the sales and profits of another firm and any form that makes such a change in can expect the other firms to react in an unpredictable way. |
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