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28 Cards in this Set

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Sunk Costs
Any cost that has been previously incurred and which is irretrievable
Marginal Costs
The extra cost involved in producing or acquiring one more unit of output
Concept of Utility
the satisfaction received by an individual from consuming a good or service.
Monopoly-
A market model in which there is a single seller, entry is limited, the product is unique, and information is restricted
Economic Profit
The amount by which total revenues exceed the total cost (explicit plus implicit costs) of producing something
Fixed & Variable Costs
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.
X & static inefficiencies
-(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.
Contrived scarcity
The situation in which the quantity of a good produced is less than that which would have resulted from a competitive market.
Collusion
An agreement among firms in an industry not to engage in competition
Explicit/Implicit Costs
(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.
Total Costs
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
Diminishing Marginal Utility
- The idea that as individuals consume more units of a good or service, they derive less additional satisfaction from each subsequent unit
Perfect Competition
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.
Oligopoly
A market model for any type of product but with few firms and difficult entry
Accounting profit
Money profits calculated by subtracting explicit costs from total revenue
Normal Profit
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.
Monopolistic Competition
A market model with relatively easy entry and exit, a large number of firms, and a similar but differentiated product.
Efficiencies (allocative & productive)
(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)
Natural barrier
Restrictions on entry into an industry because of economies of scale or total ownership of a resource
Artificial barrier
Restrictions on entry into an industry that are put into place by government
Vertical merger
A merger between 2 firsms at different stages of the productive process
Horizontal merger
A merger between 2 firms at the same stage of the productive process
Conglomerate merger
A merger between two firms producing unrelated products
Sticky Prices
The concept that in oligopolized industries prices frequently do not respond to the changed cost conditions
Inframarginal Rent
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)
Pure Economic Rent
Supply. Any payment made to a factor of production that is fixed in supply.
Ex.-fixed quantity art work
Quasi Rent
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.
Monopoly Rent
Market Structure. The profits earned by monopolists that exceed the normal profits earned by firms in perfect competition.