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33 Cards in this Set
- Front
- Back
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market power |
the ability to alter the market price of a good or service |
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market demand |
the total quantities of a good or service people are willing and able to buy at alternative prices in a given time period; the sum of individual demands |
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patent |
government grant of exclusive ownership of an innovation |
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monopoly |
a firm that produces the entire market supply of a particular good or service |
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barriers to entry |
obstacles that make it difficult or impossible for would-be producers to enter a particular market (product) |
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economies of scale |
reductions in minimum average costs that come about through increases in the size (scale) of plant and equipment |
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natural monopoly |
an industry in which one firm can achieve economies of scale over the entire range of market supply |
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contestable market |
an imperfectly competitive industry subject to potential entry if prices or profits increase |
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market mechanism |
the use of market prices and sales to signal desired outputs (or resource allocations) |
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predatory pricing |
temporary price reductions to drive out competition |
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market failure |
an imperfection in the market mechanism that prevents optimal outcomes |
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public good |
a good or service whose consumption by one person does not exclude consumption by others |
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private good |
a good or service whose consumption by one person excludes consumption by others |
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free rider |
an individual who reaps direct benefits from someone else's purchase (consumption) of a public good |
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externalities |
costs (or benefits) of a market activity borne by a third party; the difference between the social and private costs (or benefits) of a market activity |
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antitrust |
government intervention to alter market structure or prevent abuse of market power |
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government failure |
government intervention that fails to improve economic outcomes |
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factors of production |
resource inputs used to produce goods and services (land, labor, capital, entrepreneurship) |
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production function |
a technological relationship expressing the maximum quantity of a good attainable from different combinations of factor inputs |
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law of diminishing returns |
the marginal physical product of a variable input declines as more of it is employed with a given quantity of other (fixed) inputs |
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total cost |
the market value of all resources used to produce a good or service |
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fixed cost |
costs of production that do not change when the rate of output is altered (the cost of basic plant and equipment) |
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variable cost |
costs of production that change when the rate of output is altered (land and material costs) |
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economic cost |
the value of all resources used to produce a good or service; opportunity cost |
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competitive market |
a market in which no buyer or seller has market power |
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total revenue |
the price of a product multiplied by the quantity sold in a given time period. (p)(q) |
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profit |
the difference between total revenue and total cost |
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supply |
the ability and willingness to sell (produce) specific quantities of a good at alternative prices in a given time period |
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market supply |
the total quantities of a good that sellers are willing and able to sell at alternative prices in a given time period |
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equilibrium price |
the price at which the quantity of labor supplied in a given time period equals the quantity of labor demanded |
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Marginal Physical Product |
the change in total output associated with one additional unit of input |
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Average Total Cost |
total cost dived by the quantity produced in a given time period |
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Marginal Cost |
the increase in total cost associated with a one-unit increase in production |
