2.5 Micro Flashcards

1
Q

What is technological change?

A

Improving existing technologies and developing completely new technologies

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2
Q

What is invention?

A

The development of an idea into a new product or process

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3
Q

What is innovation?

A

Involves the creation of a market for the invention to make a profit

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4
Q

What is technological progress?

A

Occurs when technological change increases output for the same given factor inputs

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5
Q

What does technological change increase?

A

The number of firms in the industry

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6
Q

What would an increase in firms in the industry cause?

A

Reduce barriers to entry
Greater scope for competition
Reduces monopoly power, increasing the number of firms in the industry

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7
Q

What do high fixed costs lead to?

A

The requirement to produce significant output
Require increased scale of production in order to obtain MES
Thus creating barriers to entry and a tendency towards oligopolistic markets

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8
Q

What is the difference between innovation and invention?

A

Invention is the making of an entirely new product or process
Innovation is the creation of a market to allow the sale of this new invented product or process

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9
Q

What is destructive innovation?

A

New markets created that may destroy existing markets in the future e.g. AirBNB

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10
Q

What is sustainable innovation?

A

Develops existing markets

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11
Q

What are firms striving to create?

A

New production processes that lower AC and improve quality

New products to displace existing ones

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12
Q

Who are the winners and losers as firms innovate?

A

Old firms lose market share and might go bankrupt
Workers are displaced by machines and have to learn new skills
Those firms that are successful create new employment and profits

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13
Q

What is productive efficiency?

A

The level of output at which AC of production are minimised

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14
Q

What is dynamic efficiency?

A

The development of new products and more efficient processes that improve productive efficiency in the long run

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