Managerial Economics - Concepts And Markets

Front 1

economic profit

Back 1

total revenue minus total cost, including both explicit and implicit costs

Front 2

accounting profit

Back 2

total revenue minus total explicit costs

Front 3

Explicit costs

Back 3

Input costs that require an outlay of money by the firm

Front 4

Implicit costs

Back 4

Input costs that do not require an outlay of money by the firm

Front 5

production function

Back 5

the relationship between quantity of inputs used to make a good and the quantity of output of that goos

Front 6

How do economist and accountants differ

Back 6

The economist also takes into account the opportunity cost which the accountant does not

Front 7

4 principles of how people make decision

Back 7

1 People face trade offs
2 the cost of something is what you give up to get it
3 rational people think at the margin
4 people respond to incentives

Front 8

3 principles of how people interact

Back 8

1 trade can make everyone better off
2 markets are usually a good way to organize economic activity
3 gov't can sometimes improve market outcomes

Front 9

3 principles of how the economy as a whole works

Back 9

1 an economy's standard of living depends on its ability to produce goods and services
2 prices rise when the gov't prints too much money
3 Society faces a short-run trade off between inflation and unemployment

Front 10

diminishing marginal product

Back 10

the property whereby the marginal product of an input declines as the quantity of the input increase

Front 11

marginal product

Back 11

the increase in output that arises from an additional unit of input

Front 12

total cost curve get more/less steep as quantity produced increases

Back 12

steeper

Front 13

fixed cost

Back 13

costs that do not vary with the quantity of output produced

Front 14

variable costs

Back 14

costs that vary with the quantity of output produced

Front 15

average total cost

Back 15

total cost divided by the quantity of output

Front 16

average fixed cost

Back 16

fixed costs divided by the quantity of output

Front 17

average variable cost

Back 17

variable costs divided by the quantity of output

Front 18

marginal cost

Back 18

the increase in total cost that arises from an extra unity of production

Front 19

efficient scale

Back 19

the quantity of output that minimizes average total cost

Front 20

3 principles of cost curves

Back 20

1 marginal cost eventually rises with the quant demanded
2 the average total cost curve is u-shaped
3 the marginal cost curve crosses the average total cost curve at the minimum of average total cost

Front 21

economies of scale

Back 21

the property whereby long run average total cost falls as the quantity of output increases

Front 22

diseconomies of scale

Back 22

the property whereby long run average total cost rises as the quantity of output increases

Front 23

constant returns to scale

Back 23

the property whereby the long run average tot cost stays the same as the quantity of output changes

Front 24

market power

Back 24

the ability of a firm to influence the market price of a good

Front 25

competitive market

Back 25

mkt with many buyers and sellers trading identical products so that each buyer and seller is a price taker

Front 26

average revenue

Back 26

total revenue divided by quantity

Front 27

marginal revenue

Back 27

the change in total revenue from an additional unit sold

Front 28

quantity supplied

Back 28

level at which marginal cost equals marginal revenue

Front 29

shut down

Back 29

short run decision not to produce anything during a specific period of time due to market conditions

Front 30

exit

Back 30

long run decision to leave the market

Front 31

when do firms shut down

Back 31

shut down when total revenues is less than variable costs which is the same as price is less than average variable cost

Front 32

sunk cost

Back 32

cost that has already been committed and can not be recovered

Front 33

when do firms exit

Back 33

exit is price is less that average total cost

Front 34

monopoly

Back 34

a firm that is the sole seller of a product without close substitutes

Front 35

3 main barriers to entry

Back 35

1) Key resources own by 1 firm
2) Gov't gives a single firm exclusive right to produce some good or service
3) Cost of production makes a single producer more efficient that a large # of producers

Front 36

natural monopoly

Back 36

monopoly that arises because a single firm can supply a good or service to an entire market more cheaply than multiple firms

Front 37

what does the demand curve look like for a competitive market

Back 37

Horizonal at market price

Front 38

What does the demand curve look like for a monopoly

Back 38

downward sloping demand curve

Front 39

Average revenue equals what

Back 39

It always equals the price of the good for competitive and monopoly markets

Front 40

for monopoly, is marginal revenue more or less that the price of the good

Back 40

Less because of the downward demand slope

Front 41

How much does monopolies and competitive markets produce

Back 41

The amount where marginal cost equals marginal revenue

Front 42

How are prices different b/t competitive and monopoly markets

Back 42

Competitive mkt - P=MR=MC
Monopoly - P>MR=MC