Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
52 Cards in this Set
- Front
- Back
|
fixed costs
|
costs that don't change when firm alters the quantity produced
|
|
|
variable costs
|
costs that change when firm alters the quantity produced
|
|
|
economic profit
|
takes both explicit and implicit (opportunity) cots into account
|
|
|
diminishing marginal product
|
firm's production function gets flatter as the quantity of an input increases. meanwhile, total cost curve gets steeper
|
|
|
average total costs
|
total cost divided by quantity of input
|
|
|
marginal cost
|
amount by which cost rises with if output increases by 1 unit
|
|
|
minimum average total cost
|
point at which marginal cost curve crosses average total cost curve
|
|
|
average fixed cost
|
fixed cost divided by the quantity of output. always declines as output rises because the fixed cost is spread over a larger number of units.
|
|
|
average variable cost
|
variable cost divided by the quantity of output. typically rises as output increases because of dimin- ishing marginal product.
|
|
|
shape of ATC Curve
|
U.
|
|
|
efficient scale
|
the quantity of output that minimizes average total cost
|
|
|
Whenever marginal cost is less than average total cost....
|
average total cost is falling.
|
|
|
Explicit costs
|
Costs that require
an outlay of money by the firm |
|
|
Implicit costs
|
Costs that do not require
an outlay of money by the firm |
|
|
Fixed costs
|
Costs that do not vary with the quantity of output produced
|
|
|
Variable costs
|
Costs that vary with the quantity of output produced
|
|
|
shutdown
|
short run decision by firm not to produce anything
|
|
|
exit
|
long run decision by firm to leave the market
|
|
|
A competitive market has two characteristics:
|
-The goods offered by the various sellers are largely the same.
-There are many buyers and many sellers in the market. -in perfect: Firms can freely enter or exit the market. |
|
|
firm should increase its output....
|
If marginal revenue is greater than marginal cost
|
|
|
At the profit- maximizing level of output...
|
marginal revenue and marginal cost are exactly equal.
|
|
|
economic profit
|
the firm’s total revenue minus all the opportunity costs (explicit and implicit) of producing the goods and services sold
|
|
|
constant returns to scale
|
the property whereby long-run average total cost stays the same as the quantity of output changes
|
|
|
in a competitive market, average revenue
|
price of the good
|
|
|
For competitive firms, marginal revenue equals
|
price of the good
|
|
|
firm shuts down if...
|
the revenue that it would earn from producing is less than its variable costs of production. i.e. if price is less than average variable cost
|
|
|
If the firm produces anything, it produces:
|
...the quantity at which marginal cost equals the price of the good.
|
|
|
the firm exits the market if
|
the revenue it would get from producing is less than its total costs. price less than ATC
|
|
|
profit =
|
(TR - C) * Q ... or (Price - ATC) * Q
|
|
|
two reasons that the long-run market supply curve might slope upward.
|
1. some resources used in production may be avail- able only in limited quantities.
2. A second reason for an upward-sloping supply curve is that firms may have different costs. |
|
|
monopoly
|
a firm that is the sole seller of a product without close substitutes
|
|
|
Barriers to entry: Monopoly resources:
|
A key resource required for production is owned by a single firm.`
|
|
|
Barriers to entry: Government regulation:
|
The government gives a single firm the exclusive right to produce some good or service.
|
|
|
Barriers to entry: The production process:
|
A single firm can produce output at a lower cost than can a larger number of producers.
|
|
|
The output effect:
|
More output is sold, so Q is higher, which tends to increase total revenue.
|
|
|
The price effect
|
The price falls, so P is lower, which tends to decrease total revenue.
|
|
|
monopolistic competition
|
a market structure in which many firms sell products that are similar but not identical
|
|
|
oligopoly
|
a market structure in which only a few sellers offer similar or identical products
|
|
|
GDP
|
C + I + E + G
C = Consumer Spending I = Investment made by industry E = Excess of Exports over Imports G = Government Spending |
|
|
real GDP
|
adjusts GDP for price changes (i.e. inflation/deflation). Nominal GDP does not.
|
|
|
monopoly
|
a firm that is the sole seller of a product without close substitutes
|
|
|
Barriers to entry: Monopoly resources:
|
A key resource required for production is owned by a single firm.`
|
|
|
Barriers to entry: Government regulation:
|
The government gives a single firm the exclusive right to produce some good or service.
|
|
|
Barriers to entry: The production process:
|
A single firm can produce output at a lower cost than can a larger number of producers.
|
|
|
The output effect:
|
More output is sold, so Q is higher, which tends to increase total revenue.
|
|
|
The price effect
|
The price falls, so P is lower, which tends to decrease total revenue.
|
|
|
monopolistic competition
|
a market structure in which many firms sell products that are similar but not identical
|
|
|
oligopoly
|
a market structure in which only a few sellers offer similar or identical products
|
|
|
GDP
|
C + I + G + NX
C = Consumer Spending I = Investment made by industry NX = Excess of Exports over Imports G = Government Spending |
|
|
real GDP
|
adjusts GDP for price changes (i.e. inflation/deflation). Nominal GDP does not.
|
|
|
aggregate demand (
|
total demand for final goods and services in the economy (Y) at a given time and price level
|
|
|
aggregate supply
|
total supply of goods and services that firms in a national economy plan on selling during a specific time period. It is the total amount of goods and services that firms are willing to sell at a given price level in an economy.[
|
