Micro Test 2

Front 1

 Implicit cost

Back 1

Implicit cost

does not require an outlay of money; it’s measured by the value, in dollar terms, of the benefits that are forgone

Front 2

 Explicit cost

Back 2

Explicit cost

a cost that involves actually laying out money

Front 3

 Accounting profit

Back 3

Accounting profit

the business’s revenue minus the explicit cost and depreciation

Front 4

 Economic profit

Back 4

Economic profit

the business’s revenue minus the opportunity cost of its resources. It’s usually less than the accounting profit

Front 5

 Marginal cost (MC)

Back 5

Marginal cost (MC)

the additional cost incurred by doing one more unit of that activity

Front 6

 Marginal benefit

Back 6

Marginal benefit

the additional benefit derived from undertaking one more unit of that activity

Front 7

 Production function

Back 7

Production function

the relationship between the quantity of inputs a firm uses and the quantity of output it produces

Front 8

 Fixed input

Back 8

Fixed input

an input whose quantity is fixed and cannot be varied

Front 9

 Long run

Back 9

Long run

the time period in which all inputs can be varied

Front 10

 Short run

Back 10

Short run

the time period in which at least one input is fixed

Front 11

 Variable cost (VC)-

Back 11

Variable cost (VC)-

a cost that depends on the quantity of output produced. It’s the cost of the variable input

Front 12

 Total cost (TC)-

Back 12

Total cost (TC)-

the sun of the fixed cost and the variable cost of producing that quantity of output

Front 13

 Fixed cost (FC)-

Back 13

 Fixed cost (FC)-

a cost that doesn’t depend on the quantity of output produced. It’s the cost of the fixed input

Front 14

 Average total cost (ATC

Back 14

 Average total cost (ATC

(average cost) total cost divided by quantity of output produced

Front 15

 Average variable cost (AVC)-

Back 15

 Average variable cost (AVC)-

the variable cost per unit of output

Front 16

 Diseconomics of scale

Back 16

 Diseconomics of scale

when long-run average total cost increases as output increases

Front 17

 Economics of scale

Back 17

 Economics of scale

when long-run average total cost declines as output increases

Front 18

 Marginal product of labor (MP

Back 18

 Marginal product of labor (MP

equals the real wage

Front 19

 Constant returns to scale

Back 19

 Constant returns to scale

a range of production in which long-run average total cost is constant as output increases

Front 20

 Diminishing returns to an input

Back 20

 Diminishing returns to an input

the effect observed when an increase in the quantity of an input, while holding the levels of all other inputs fixed, leads to a decline in the marginal product of that input

Front 21

 Perfectly competitive market/industry

Back 21

 Perfectly competitive market/industry

a market in which all market participants are price-takers

Front 22

 Price-taking producer

Back 22

 Price-taking producer

a producer whose actions have no effect on the market price of the good it sells

Front 23

 Price-taking consumer

Back 23

 Price-taking consumer

a consumer whose actions have no effect on the market price of the good he or she buys

Front 24

 Marginal revenue (MR

Back 24

 Marginal revenue (MR

the change in total revenue generated by an additional unit of output

Front 25

 Total revenue (TR)-

Back 25

 Total revenue (TR)-

the total value of sales of a good (the price of the good multiplied by the quantity sold)

Front 26

 Profit

Back 26

 Profit

the making of gain in business activity for the benefit of the owners of the business

Front 27

 Shut-down price

Back 27

 Shut-down price

equal to the minimum average variable cost, a firm will cease production in the short run if the price falls below the shut-down price

Front 28

 Break-even price

Back 28

 Break-even price

the market price at which a price-taking firm earns zero profits

Front 29

 Short-run market equilibrium

Back 29

 Short-run market equilibrium

when the quantity supplied equals the quantity demanded, taking the number of producers as given

Front 30

 Long-run market equilibrium

Back 30

 Long-run market equilibrium

when the quantity supplied equals the quantity demanded, given that sufficient time has elapsed for entry into and exit from the industry to occur

Front 31

 Standardized product

Back 31

 Standardized product

also known as a commodity, when consumers regard the products of different producers as the same good

Front 32

 Short-run industry supply curves

Back 32

shows how the quantity supplied by an industry depends on the market price given a fixed number of producers

Front 33

 Long-run industry supply curves

Back 33

 Long-run industry supply curves

when the quantity supplied equals the quantity demanded, given that sufficient time has elapsed for entry into and exit from the industry to occur

Front 34

 Free entry and exit

Back 34

 Free entry and exit

when new producers can easily enter into or leave an industry

Front 35

 Indifference curve

Back 35

 Indifference curve

a line that shows all the consumption bundles that yield the same amount of total utility for an individual

Front 36

 Marginal rate of substitution (MRS)-

Back 36

 Marginal rate of substitution (MRS)-

of good R in place of good M is equal to MUr/MUm, the ratio of the marginal utility of R to the marginal utility of M

Front 37

monopolist

Back 37

monopolist

the only firm that produces a good or service for which there are no good substitutes

Front 38

market power (monopoly power)

Back 38

market power (monopoly power)

the ability of a producer to raise prices

Front 39

barrier to entry

Back 39

barrier to entry

things that prevent other firms from entering into the industry

Front 40

what are the barriers to entry?

Back 40

barriers to entry:

1. patents and copyrights
2. license to opperate
3. control of a resource
4. returns to scale

Front 41

natural monopoly

Back 41

natural monopoly

exists when economies of scale provide a large cost advantage to having all of an industry's output produced by a single firm

Front 42

single-price monopoly

Back 42

single-price monopoly

offers its products to all consumers at the same price

Front 43

price discrimination

Back 43

price discrimination

when a firm can charge based on willingness to pay (firm charges more to people willing to pay more)

Front 44

perfect price discrimination

Back 44

perfect price discrimination

takes place when a monopolist charges each consumer his or her willingness to pay--the maximum that consumer is willing to pay

Front 45

ologopolist

Back 45

oligopolist

a producer in an industry with only a small numbers of producers

Front 46

duopolist

Back 46

duopolist

a duopoly is an oligopoly consisting of only two firms, each form is a duopolist

Front 47

cartel

Back 47

cartel

an agreement by several producers that increases their combined profits by telling each one how much to produce

Front 48

interdependence

Back 48

interdependence

when the decisions of two or more firms significantally affect each others' profits

Front 49

nash equilibrium (noncooperative equilibrium)

Back 49

nash equilibrium
(noncooperative equilibrium)

is the result when each player in a game chooses the action that maximizes his or her payoff given the actions of other players, ignoring the effets of his or her action on the payoffs received by those other players

Front 50

collusion

Back 50

collusion

sellers engage in collusion when they cooperate to raise each other's profits

Front 51

game theory

Back 51

game theory

the study of behavior in situations of interdependence