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9 Cards in this Set
- Front
- Back
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long-run supply curve
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As it applies to macroeconomics, a supply curve for which price, but not real output, changes when the demand curves shifts; a vertical supply curve that implies fully flexible prices.
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constant-cost industry
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An industry in which expansion by the entry of new firms has no effect on the prices firms in the industry must pay for resources and thus no effect on production costs.
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decreasing-cost industry
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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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productive efficiency
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The production of a good in the least costly way; occurs when production takes place at the output at which average total cost is a minimum and marginal product per dollar's worth of input is the same for all inputs.
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allocative efficiency
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The apportionment of resources among firms and industries to obtain the production of the products most wanted by society (consumers); the output of each product at which its marginal cost and price or marginal benefit are equal, and at which the sum of consumer surplus and producer surplus is maximized.
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consumer surplus
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The difference between the maximum price a consumer is (or consumers are) willing to pay for an additional unit of a product and its market price; the triangular area below the demand curve and above the market price.
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producer surplus
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The difference between the actual price a producer receives (or producers receive) and the minimum acceptable price; the triangular area above the supply curve and below the market price.
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increasing-cost industry
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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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creative destruction
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the hypothesis that the new products and production methods simultaneously destroys the market power of existing monopolies
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