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18 Cards in this Set
- Front
- Back
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Price-taking producer
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their actions have no effect on the price, take the equilibrium price
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Price- taking consumer
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a consumer whose actions have no effect on the price, take equilibrium price
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Perfectly competitive industry
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industry in which producers are price- takers
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Market share
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the fraction of the total industry output the producer is responsible for.
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Standard product/ commodity
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the product of different producers being the same good
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Profit
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difference between total revenue and total cost
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Principle of marginal analysis
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says that the optimal quantity of an activity is the quantity at which marginal benefit is equal to marginal cost.
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Marginal revenue
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the change in total revenue generated by one more unit of output
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Optimal output rule
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profit is maximised by producing the quantity of output at which the marginal revenue is equal to the marginal cost.
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Accounting profit
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business revenue minus the explicit cost and depreciation.
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Economic profit
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business revenue minus the opportunity cost of its resources. Is usually less than the accounting profit.
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Capital
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the business' value of its assets
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Implicit cost of capital
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the opportunity cost of the capital, the monetary cost of the capital
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Break even price
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for a price taking firm it is the market price at which it earns zero profits.
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Shutdown price
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the price at which the firm will cease to produce in the short run= the minimum average variable cost
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Sunk cost
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cost that has already been incurred and is non recoverable ex. Capital. Should be ignored in considering future designs about output.
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Short run market equilibrium
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the quantity supplied equals the quantity demanded, taking the number of producers as given.
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Long run market equilibrium
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when the quantity demanded is equal to the quantity supplied given that sufficient time has elapsed for entry into and exit from the industry to occur.
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