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28 Cards in this Set
- Front
- Back
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Sunk Costs
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Any cost that has been previously incurred and which is irretrievable
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Marginal Costs
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The extra cost involved in producing or acquiring one more unit of output
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Concept of Utility
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the satisfaction received by an individual from consuming a good or service.
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Monopoly-
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A market model in which there is a single seller, entry is limited, the product is unique, and information is restricted
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Economic Profit
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The amount by which total revenues exceed the total cost (explicit plus implicit costs) of producing something
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Fixed & Variable Costs
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Fixed cost-Costs which do not change as the level of production increases or decreases. These costs cannot be changed in the short run. Variable costs-Costs which increase when production increases and decrease as production decreases. These costs do change in the short run.
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X & static inefficiencies
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-(X)The idea that monopolies may lack the incentive to reduce costs because of a lack of competition.
(static)The idea that monopolies produce too little quantity of a good at too high a price. |
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Contrived scarcity
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The situation in which the quantity of a good produced is less than that which would have resulted from a competitive market.
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Collusion
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An agreement among firms in an industry not to engage in competition
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Explicit/Implicit Costs
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(explicit)The actual dollar or accounting cost associated with obtaining something (implicit)The opportunity cost of resources that is used in obtaining something and for which there is no explicit payment.
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Total Costs
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The sum total of all resources that are used whether or not there is a direct money cost involved. The total of both explicit and implicit costs
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Diminishing Marginal Utility
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- The idea that as individuals consume more units of a good or service, they derive less additional satisfaction from each subsequent unit
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Perfect Competition
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A market model in which there is a very large number of buyers and sellers, entry and exit are possible, the product is homogeneous, and information is free.
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Oligopoly
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A market model for any type of product but with few firms and difficult entry
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Accounting profit
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Money profits calculated by subtracting explicit costs from total revenue
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Normal Profit
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A return to a firm that includes all costs of production and an amount equal to what could have been earned if the business had invested elsewhere; the opportunity cost of production.
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Monopolistic Competition
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A market model with relatively easy entry and exit, a large number of firms, and a similar but differentiated product.
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Efficiencies (allocative & productive)
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(all-A situation in which the socially optimal amount of a good is produced in an industry) (prod-A situation in which production occurs at the lowest possible per unit cost)
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Natural barrier
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Restrictions on entry into an industry because of economies of scale or total ownership of a resource
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Artificial barrier
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Restrictions on entry into an industry that are put into place by government
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Vertical merger
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A merger between 2 firsms at different stages of the productive process
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Horizontal merger
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A merger between 2 firms at the same stage of the productive process
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Conglomerate merger
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A merger between two firms producing unrelated products
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Sticky Prices
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The concept that in oligopolized industries prices frequently do not respond to the changed cost conditions
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Inframarginal Rent
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Labor-The portion of a payment to a factor of production such as labor in excess of what it would have been willing to accept. Ex.-teachers who are willing to work for only $15,000, but are hired at $23,000 ($8,000 inframarginal rent)
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Pure Economic Rent
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Supply. Any payment made to a factor of production that is fixed in supply.
Ex.-fixed quantity art work |
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Quasi Rent
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Artificial demand. The short-run profits earned by firms in perfect competition when demand unexpectedly increases.
Ex.-farmers in perfect competition who make no profit suddenly have demand for wheat to be shipped overseas. Unexpected profit that will dissapear once circumstances return to normal. |
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Monopoly Rent
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Market Structure. The profits earned by monopolists that exceed the normal profits earned by firms in perfect competition.
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