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35 Cards in this Set

  • Front
  • Back
Welfare economics
the study of how the allocation of resources affects economic well0being
Willingness to pay
the maximum amount that a buyer will pay for a good
Consumer surplus
the amount a buyer is willing to pay for a good minus the amount the buy actually pays for it
the value of everything a seller must give up to produce a good
Producer surplus
the amount a seller is paid for a good minus the seller's cost of providing it
the property of a resource allocation of maximizing the total surplus received by all members of society
the property of distributing economic prosperity uniformly among the members of society
Deadweight ,loss
the fall in total surplus that results from a market distortion, such as a tax
Total revenue
the amount a firm receives for the sale of its output
Total cost
the market value of the inputs a firm uses in production
total revenue minus total cost (TR-TC)
Explicit costs
input costs that require an outlay of money by the firm
Implicit costs
inputs costs that do not require an outlay of money by the firm
Economic profit
total revenue minus total, including both explicit and implicit costs
Accounting profit
total revenue minus total explicit cost
Production functions
the relationship between quantity of inputs used to make a good and the quantity of output of that good
Diminishing marginal product
the property whereby the marginal product of an input declines as the quantity of the input increases
Fixed costs
costs that do not vary with the quantity of output produced
Variable costs
costs that vary with the quantity of output produced
Average total cost
total costs costs divided by the quantity of output (TC/Q)
Average fixed cost
fixed cost divided by the quantity of output
Average variable cost
variable cost divided by quantity of output
Marginal cost
the increase in total cost that arises from an extra unit of production
Efficient scale
the quantity of output that minimizes total cost
Diseconomies of scale
the property whereby long-run average total cost rises as the quantity of output increases
Constant returns of scale
the property whereby long-run average total cost stays the same as the quantity of output changes
Competitive market
a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker
Average revenue
total revenue divided by the quantity sold (TR/Q)
Marginal revenue
the change in total revenue from an additional unit sold
Sunk cost
a cost that has already been committed and cannot be recovered
a firm that is the sole seller of a product without close substitutes
Natural monopoly
a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms
Price discrimination
the business practice of selling the same good at different prices to different customers
a market structure in which only a few sellers offer similar or identical products
Monopolistic competition
a market structure in which many firms sell products that are similar but not identical