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29 Cards in this Set
- Front
- Back
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allocative efficiency |
- Output of each product at which its marginal cost and price or marginal benefit are equal. - the appointment of resources among firms and industries to obtain the production of the products most wanted by society. |
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average revenue |
Total revenue from the sale of a product divided by the quantity of the product sold. |
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break-even point |
- The firm makes only normal profit. - The point that is equal to the minimum point of the average total cost curve. |
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constant-cost industry |
- Expansion by the entry of new firms has no effect on the prices firms in the industry must pay for resources. - an industry in which expansion through the entry of new firms keeps the prices firms in the industry must pay for resources constant and therefore keeps their production costs constant. |
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decreasing- cost industry |
- The entry of firms decreases the prices firms in the industry must pay for resources. - an industry in which expansion through the entry of firms lowers the prices that firms in the industry must pay for resources and therefore decreases their production costs. |
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imperfect competition |
- Includes monopoly, monopolistic competition and oligopoly. - the competition that domestic firms encounter from the products and services of foreign producers. |
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increasing-cost industry |
- Entry of new firms increases the prices firms in the industry must pay for resources. - an industry in which expansion through the entry of new firms raises the prices firms in the industry must pay for resources and therefore increases their production costs. |
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long run supply curve |
- Prices at which a purely competitive industry will make various quantities available in the long run. - a schedule or curve showing the prices at which a purely competitive industry will make various quantities of the product available in the long run. |
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marginal revenue |
- Change in total revenue divided by the change in the quantity of the product sold. - additional revenue obtained from selling one more unit of output. |
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monopolistic competition |
Many firms sell a differentiated product, entry is relatively easy, and there is considerable non-price competition. |
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MR=MC rule |
Firm will maximize its profit (or minimize its losses) by producing that output at which marginal revenues and marginal cost are equal. |
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oligopoly |
Few firms sell either a standardized or differentiated product, entry is difficult, and the firm has limited control over product price because of mutual interdependence. |
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price taker |
- Unable to affect the price at which a product or resource sells by changing the amount it sells. - a firm in a perfectly competitive market structure. |
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productive efficiency |
Output at which average total cost is a minimum and at which marginal product per dollar's worth of input is the same for all inputs. -the production of a good in the least costly way that occurs with the above. |
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pure competition |
Large number of firms sell a standardized product, entry is very easy, and the individual seller has no control over the product price. |
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pure monopoly |
Sells a unique product, entry is blocked, and the single firm has considerable control over the product price. |
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short-run supply curve |
- Portion of the firm's short-run marginal cost curve which lies above its average variable cost curve. - a supply curve that shows the quantity of a product a firm in purely competitive industry will offer to sell at various prices in the short run. |
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total revenue |
Quantity sold multiplied by the price at which it is sold. |
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accounting profit |
net operating income or it equals PQ minus the cost of land minus the cost of labor minus the cost of capital. |
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equity capital |
cost of ownership. ownership; funds investors or owners put into a firm. |
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economic profit |
accounting profit minus the cost of equity capital. |
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negative economic profit |
total revenue is less than total costs, including opportunity costs. |
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zero economic profit |
total revenue equals total costs, including opportunity costs. |
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normal profit |
the accounting profit that corresponds to a zero economic profit. |
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positive economic profit |
total revenue exceeds total costs, including opportunity costs. |
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shutdown price |
the minimum point of the average variable cost curve. |
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break-even price |
a price that is equal to the minimum point of the average total cost curve. |
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economic efficiency |
the situation in which the price of a good or service just covers the marginal cost of producing that good or service and people are getting the goods and services that they want. |
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producer surplus |
the difference between the price firms would have been willing to accept for their products and the price they actually receive. |
