AP Microeconomics I Flashcards
Imported from https://quizlet.com/7250630/all-22-ap-microeconomics-chapters-flash-cards/
Externality
The uncompensated impact of one person’s actions on the well-being of a bystander, can be positive(restoring old buildings) or negative(take pollution for example)
Arrow’s impossibility theorem
A mathematical result showing that, under certain assumed conditions, there is no scheme for aggregating individual preferences into a valid set of social preferences. Conditions ae :No dictators, transitivity, unanimity, independence of irrelevant alternatives.
moral hazard
The tendency of a person(the agent) who is imperfectly monitored by the principal(boss) to engage in dishonest or otherwise undesirable behavior. Can be reduced by delayed payment, high wages, or better monitoring.
John Stuart Mill
English philosopher and economist remembered for his interpretations of empiricism and utilitarianism (1806-1873) Benthamite, wrote “On Liberty”. Advocated right of workers to organize, equality for women, and universal suffrage
Hidden characteristics
Things one party of a transaction knows about itself but which are unknown to the other party, one of the causes of asymmetric information.
Asymmetric information
Situations in which buyers and sellers are not equally well informed about the characteristics of goods and services for sale in the marketplace
adverse selection
The tendency for the mix of unobserved attributes to become undesirable from the standpoint of an uninformed party. (In other words the seller knows more about a product, then the buyer does, which causes “adverse” problems.)
agent
a person who is performing an act for another person(the principal)
principal
A person for whom another person, called the agent, is performing some act, otherwise known as a BOSS.
delayed payment
One of the ways the principal (boss) attempts to reduce the chance of moral hazard of his agent (employee), it works because the agent perceives that their will be a greater loss if he engages in undesirable behavior. Example : End of year bonus.
Hidden action
Action taken by one party in a relationship that cannot be observed by another party, one of causes of asymmetric information.
lemons problem
When buyer’s can’t tell if if the good they are buying is high-quality or low-quality. ex. Used Cars (people assume that since they are used, there is something wrong with them). Extreme Case- People with HQ goods don’t want to sell for the low prices offered and so drop out, leaving only lemons (low quality goods).
Screening
An action taken by an uninformed party to induce an informed party to reveal information or reduce asymmetric information. For example : Interviews, Credit History, phone records, etc,.
Premium
The periodic amount of money the insured pays to a health plan for insurance coverage, insurance companies use this as away to screen between risky and safe people.
Political Economy
the study of government using the analytic methods of economics.
Condorcet paradox
The failure of majority rule to produce transitive preferences for society. Shows that the order that things are voted on effects the overall results.
transitivity
The ability to recognize relations among elements in a serial order (for example, if A > B and B > C, then A > C).
Broda count
A system where voters use numbers to mark their preferences for all the nominated candidates. preferences are assigned a value (1, .9 .8 .7 .6). Is supposed to counter and correct Condorcet paradox.
Kenneth Arrow
An American economist and joint winner of the Nobel Memorial Prize in Economics, proved that when there are 3 or more options it is impossible to aggregate individual preferences into a valid set of social preferences.
unanimity
state of total agreement or unity, one of the conditions of arrow’s impossibility theorem.
Median voter theorem
Mathematical result that shows if voters are choosing a point along a line and each voter wants the point closest to his preferred point, then majority rule will pick the most preferred point of the median voter. Condorcet paradox actually does not arise in this situation.
Independence of irrelevant alternatives
A principle that the ranking between any two outcomes A and B should not depend on whether some third outcome C is also available , one of the conditions of arrow’s impossibility theorem.
behavioral economics
The sub-field of economics that integrates the insights of psychology
satisficers
Decision makers who tend to settle for something that is satisfactory, even if it may not be ideal. Some economist believe that this term should replace the idea of rational customers.
ultimatum game
A game in which a proposer is given a sum of money and makes an offer to a responder as to how this money should be split between them. The responder must choose to accept or reject the offer. This game has been used to study people’s decision-making strategies.
Perfect Complements
Goods that a consumer is interested in consuming but only in fixed proportions; has L shaped(right angled) indifference curves. Like left shoes and right shoes.
Perfect Substitutes
Two goods with straight line indifference curves. Like Nickels and dimes.
Indifference Curve
A curve that shows consumption bundles that give the consumer the same level of satisfaction (utility). Are ALWAYS downward sloping, NEVER cross other ___________ _________s, and higher __________ _________s are ALWAYS preferred when compared to lower __________ __________s. Also they are always bowed inwards.
Marginal Rate of substitution
The rate in which a consumer is willing to trade one good for another and stay on the same indifference curve. (MRS)
Budget Constraint
The limit on the consumption bundles that a consumer can afford., the set of all bundles a consumer can purchase for given values of income and price (first point is buying all one product and the end point is all of the other product)
Consumer Optimum
A choice of a set of goods and services that maximizes the level of satisfaction for each consumer, subject to limited income. The point where the budget constraint is tangent to the indifference curve. Is also where the marginal rate of substitution(MRS) = relative price.
Normal Good
A good for which, other things equal, an increase in income leads to an increase in demand.
inferior good
a good for which, other things equal, an increase in income leads to a decrease in demand
income effect
The change in consumption that results when a price change moves the consumer to a higher or lower indifference curve.
substitution effect
The change in consumption that results when a price change moves the consumer along a given indifference curve to a point with a new marginal rate of substitution.
Giffen Good
A good for which an increase in the price raises the quantity demanded, usually an inferior good accounting for a large share of a consumers budget that has a positively sloped demand curve because the income effect of a price change out weighs the substitution effect. Important because it VIOLATES Law of Demand. Potatoes in 19th century.
Interest Rate
Cost of borrowing money, expressed as a percentage of the amount borrowed per year.
Poverty
The condition of lacking an adequate amount of money, belongings, and/or means of financial support. Is correlated with race. age, and family composition.
Poverty Rate
Percentage of people whose income falls below the poverty line, measures distribution of income. All time low achieved in 1973, however has increased or remained near the same level since then which is related to income inequality.
Income inequality
The existence of disproportionate distribution of total national income among households whereby the share going to rich persons in a country is far greater than that going to poorer persons. From 1930 to 1970 the gap between the rich and poor closed, but from the 1980’s to 2000’s this trend has reversed itself in the U.S.
Poverty line
An absolute level of income set by the federal government for each family size below which a family is deemed to be in poverty, roughly 3 times the cost level of proving an adequate diet.
in kind transfers
Transfers to the poor given in the form of goods and services rather than cash, one of the problems that result when measuring inequality or poverty.
Life Cycle
The regular pattern of income variation over a person’s life. A persons income generally is low when young, then increases until about 50 and drops off after retirement at age 65. Another problem when measuring poverty and income inequality especially when compared to true living standards.
Permanent income
A person normal (average) income. Differs from transitory income which depends on outside conditions.
utility
A measure of happiness or satisfaction
Transitory income
the unexpected gain or loss of income that a person experiences. It is the difference between a person’s regular(permanent) and actual income in any year.
economic mobility
The degree of upward mobility in a society; refers to the economic fortunes of different groups often measured by the percent of income each group makes. Is really apparent in the U.S as only 1/5 millionaires actually inherited their income.
Utilitarianism
The theory, proposed by Jeremy Bentham in the late 1700s, that government actions are useful only if they promote the greatest good (utility) for the greatest number of people.
liberalism
The political philosophy according to which the government should choose policies deemed just, as evaluated by an impartial observer behind “a veil of ignorance” Started by Philosopher John Rawls. Based on idea that we should maximize the minimum.
Jeremy Bentham
The creator of Utilitarianism. Believed that public problems should dealt with on a rational scientific basis. Believed in the idea of the greatest good for the greatest number. Wrote, Principles of Morals and Legislation.
diminishing marginal utility
The principle that our additional satisfaction, or our marginal utility, tends to go down as more and more units are consumed.
John Rawls
Harvard philosopher who argued that justice is fairness and social equality. Wrote” A theory of Justice” which founded liberalism(as it relates to economics).
maximum criterion
The claim that gov’t should aim to maximize the well-being of the worst-off person in society. Also known as Rawls rule, is a fundamental part of his economic theory of liberalism.
Social Insurance
Government policy aimed at protecting people against the risk of adverse events
libertarianism
The political philosophy according to which the government should punish crimes and enforce voluntary agreements but not redistribute income. Belief in the equality of opportunities.
Anarchy, State, and Utopia
A work of political philosophy written by Robert Nozick in 1974, argues in favor of a minimal state, “limited to the narrow functions of protection against force, theft, fraud, enforcement of contracts, and so on.” When a state takes on more responsibilities than these, Nozick argues, rights will be violated. Support libertarianism.
the liberty principle
Each person is to have an equal right to the most extensive system of basic liberties that’s compatible with everyone Else’s right to the same thing. This principle is the more important than the difference principle, as this requirements come first(or at least according to Rawls)
the difference principle
Economic inequalities should be arranged so that they are to the benefit of everyone, including the least well off
Welfare
Government programs that supplement the incomes of the needy,
Negative income tax
A tax system that collects revenue from high-income households and gives transfers to low-income households
EITC
EARNED INCOME TAX CREDIT: a program that gives tax credits and even cash payment to qualified workers, works like an negative income tax.
child labor
Full-time employment of children for work otherwise done by adults.
Workfare
Programs that require welfare recipients to exchange some of their labor in return for benefits.
1996 Welfare reform bill
Signed by Clinton. Ended AFDC and required Congress to appropriate a total of $16.8 billion to states annually through 2002. Clinton said “ Welfare should be a second chance, not a way of life”.
Gini coefficient
A measure of income inequality that ranges from 0 (perfect equality) to 1 (perfect inequality). It is calculated by dividing the area between the perfect equality line and the Lorenz curve by the total area on the right of the equality line
Lorenz curve
A widely used graph of the distribution of income, with cumulative percentage of families plotted along the horizontal axis and cumulative percentage of income plotted along the vertical axis. Used in Gini coefficent calculation.
Compensating differential
A difference in wages that arises to offset the non-monetary characteristics of different jobs. Why garbage disposers earn more than someone with the same skills.
Beauty
________ pays big money. That is why most movie stars are this. Is an average increase in wages of 5 to 10% on average when compared to normal population. A type of discrimination.
Human Capital
The accumulation of investments in people, such as education and on-the-job training, just as important if not more important than physical capital.
Signaling Theory
Theory that employers are willing to pay more for people with certificates, diplomas, degrees, and other indicators of superior ability. More of a correlation to natural ability.
Superstar Theory
A theory that states that superstars will rise in markets where: 1. Every customer wants to enjoy the good supplied by best producer. 2. The good is supplied with technology that makes it possible for customers to receive it at a low cost.
Union
A worker association that bargains with employers over wages, benefits, and working conditions, Usually earn 10 to 20% more than similar unionized workers. Usually successful because of ability to strike.
Strike
the organized withdrawal of labor from a firm by a union
selection bias
The tendency for a sample to differ from the population because of systematic exclusion of some part of the population
Efficiency wages
above equilibrium wages paid by firms to increase worker productivity
Discrimination
The offering of different opportunities to similar individuals who differ only by race, ethnic group,sex, age or other personal characteristics.
employer discrimination
An arbitrary preference by an employer for one group of workers over another. Usually decreases over time due to competitors advantage of making more profit. Also if and when it occurs it is more often due to policy enacted by local governments.
customer discrimination
The willingness of consumers to pay more for a product produced by members of a favored group, even if the quality of the product is unaffected.
Labor
The effort that people devote to a task for which they are paid, is a factor of production. The most important factor of production because it creates the most income.
Dividends
A part of a company’s profit that is divided among the people with shares in the company
Factors of production
Land, labor, and capital(LLC), sometimes entrepreneurial ability ; the three groups of resources that are used to make all goods and services
Land
All natural resources that are used to make goods and services, factor of production
Capital
Assets available for use in the production of further assets, serve as an investment, for example factory equipment
Derived Demand
Business demand that ultimately comes from (derives from) the demand for consumer goods. Describes the demand of all factors of production.
Labor market
The input/factors of production market in which households supply work for wages to firms that demand labor.
Production Function
The relationship between quantity of inputs used to make a good and the quantity of output of that good
Marginal product of labor
the change in output from hiring one additional unit of labor
diminishing marginal product
the property whereby the marginal product of an input declines as the quantity of the input increases.
value of marginal product
marginal product times market price; demand curve for labor augmenting
Wage
Equals the value of the marginal product o labor and adjusts to balance the supply and demand of labor.
Real Wage
The wage paid to workers measured in terms of purchasing power; the real wage for any given period is calculated by dividing the nominal (dollar) wage by the CPI for that period, is usually linked directly with productivity.
CPI
Consumer Price Index (changes in average price of consumption the or cost of living). , (Total Cost this Period/Total Cost Base Period) x 100
Monopsony
A market with only one buyer or employer of a factor of production. Is similar to a monopoly just in the opposite sense. Causes deadweight losses because the single buyer would limit the factors of employment in order to increase profit, and prevent reasonable transactions from taking place.
Purchase Price
_________ _______ of land and capital is the price a person pays to own the factor of production indefinitely. Distinguished from the rental price.
Rental Price
Is the price a person pays to use that factor for a limited period of time. Distinguished from purchase price.
marginal product
The equilibrium rental income at ant point in time equals the value of that factors _________ ______.
capital income
Income earned on savings that have been put to use through financial capital markets.
labor income
The sum of wages, salaries, and fringe benefits paid to workers
Stockholder
An owner of one or more shares of a corporation
Neoclassical theory of distribution
Economic theory that states that the amount paid to each factor of production depends on the supply and demand for that factor, with the derived demand. In equilibrium, each factor of production earns the value of its marginal contribution to the production of goods and services.
Game Theory
The study of how people behave in strategic situations(involving the anticipation of actions taken by others and yourself).
Oligopoly
A market structure with only a handful of competitors selling products that are either similar or different. Barriers to entry are typically high. For example the market for Tennis Balls. More interdependence in these markets.
Prisoners dilemma
A particular “game” between two captured prisoners that illustrates why cooperation is difficult to maintain even when it is mutually beneficial to do so. Useful when analyzing oligopoly
self interest
A key feature of oligopoly is between tension and _____ _________.
Duopoly
Two firms compete vigorously with the other for customers using non-price competition. There are very strong barriers to entry
Collusion
An agreement among firms in a market about quantities to produce or prices to charge, happens in an oligopoly, and forms a cartel.
Cartel
A group of firms acting in unison (In collusion), a hallmark of oligopoly.
Antitrust laws
What limits oligopoly’s in the U.S from explicitly colluding and forming a cartel.
Nash Equilibrium
A situation in which economic participants interacting with one another each choose their best strategy given the strategies that all the others have chosen
John Nash
Prominent theoretical mathematician who suffered from schizophrenia; awarded Nobel Prize for his game theory that is used by economists today. Life was portrayed in the book and movie “A Beautiful Mind”
oligopoly
When firms in an ________ choose production to maximize profit, they produce a quantity of output greater than the level produced by monopoly and less than the quantity produced by competition.
Collusion
_________ among members of an oligopoly generally decrease when more members are added..
Output effect
Because price is above marginal cost, selling one more unit at the going price will raise profit
Price effect
Raising production increases market quantity, which reduces market price and reduces profit on all units sold.
output effect
If the ________ ____ is larger than the price effect than firms will increase production , if not they will decrease production.
Dominant Strategy
A strategy that is best for a player in a game regardless of the strategies chosen by the other players
OPEC
Organization of Petroleum Exporting Countries; international cartel that inflates price of oil by limiting supply; Venezuela, Saudi Arabia and UAE are prominent members
tit for tat
A strategy for the repeated prisoner’s dilemma in which players cooperate on the first move, then mimic their partner’s last move on each successive move. The most successful strategy in game theory.
Predatory Pricing
Selling below cost with the intention of punishing a competitor or gaining higher long-term profits by putting competitors out of business.
Tying
Practice of requiring a customer to purchase on good in order to purchase another, a controversial business practice.
Advertising
Any paid form of communication through mass media directed at identified consumers to provide information and influence their actions, is a hallmark of mainly monopolistic competition and some oligopolistic competition, because firms are selling slightly differentiated products they need to distinguish themselves.
Monopolistic competition
Market or industry characterized by numerous buyers and relatively numerous sellers trying to differentiate their products from those of competitors(similar but not identical), like the book and music industry.
Imperfect competition
Market structure where all conditions of pure competition are not met; monopolistic competition, oligopoly, and monopoly
Brand names
The use of party names to evoke certain positions or issues. For instance, “Adidas” might immediately call to mind athletics in the same way that “Democrat” might remind you of environmental policies or universal health care.
oligopoly
A market structure in which only a few sellers offer similar or identical products, like Internet search industry dominated by Google, Bing and Yahoo.
Concentration ratio
A measure of market power - the percentage of all sales that is accounted for by the four or eight largest firms in the market
Product differentiation
Manufacturers’ use of minor differences in quality and features to try to differentiate between similar goods and services, found in monopolistic competition.
Short run
In the ____ ____ monopolistic competition is similar to a monopoly when it comes to maximizing profit. The quantity is determined from where MC intersects with MR and then demand at that quantity determines the price.
Long run
In the ____ ____ monopolistic competition makes economic profits = 0, as the demand curve shifts ad has a point of tangency with the ATC curve. This makes the area between the curves at the quantity sold zero.
Excess Capacity
The difference between the long-run output in monopolistic competition and the output at minimum average total cost, one of the two distinguishing features, monopolistic competition does NOT produce at efficient scale like competitive markets and therefore has _______ ________.
Markup
A difference between perfect competition and monopolistic competition, monopolistic has a _______ because P>MC compared to perfect competition which P=MC in the long run.
Deadweight losses
Monopolistic competition also creates ___________ _______. In that respect it is similar to monopolies.
Product variety externality
The externality where consumers get consumer surplus from the intro of new product, so the entry of new firm conveys positive externality on customers. Associated with monopolistic competition
Business-stealing externality
The externality where new businesses (associated with monopolistic competition) take customers from old businesses because they are new, people like trying out new places, which hurts established businesses
The Affluent Society
1958 book by John Kenneth Galbraith; Covers Consumerism and prosperity in the 1950s; Galbraith criticized society where increasing private affluence(opulence) exists alongside increasing poverty(squalor). He urged greater governmental expenditures on education and health care.
John Kenneth Galbraith
Economist who published The Affluent Society, in which he claimed that the nations postwar prosperity was a new phenomenon.
Sherman Antitrust Act
First federal action against monopolies, it was signed into law by Harrison in 1890 and was extensively used by Theodore Roosevelt for trust-busting. However, it was initially misused against labor unions. “To reduce the market power of the large and powerful “trusts”. Succeeded by the Clayton Antitrust Act.
Monopoly
A firm that is the sole seller of a product without any close substitutes, (For example Standard Oil for much of the 20th century). Makes the firm a price maker. Is created when their are barriers to entry which have 3 main sources: Monopoly resources, Government regulation, and the production process.
Copyright
Protection giving the owner the exclusive right to reproduce or distribute copies of his or her own work for a given period of time.
Cecil Rhodes
British entrepreneur and politician involved in the expansion of the British Empire from South Africa into Central Africa. The colonies of Southern Rhodesia (now Zimbabwe) and Northern Rhodesia (now Zambia) were named after him. Founded the De Beers Mining Company which has a monopoly on diamonds. The benefactor of the Rhodes Scholarship.
Price maker
A firm whose own activity in the market affects price. The firm has the ability to choose among combinations of price and output. Firms operating as monopolists, oligopolists, and monopolistic competitors are _______.
Monopoly resources
A barrier to entry in a monopolistic market, when a key resource required for production is owned by a single firm, classic example is DeBeers.
DeBeers
A company that has a monopoly in diamonds (70% of the world’s diamonds), started by Cecil Rhodes. Is based on having monopoly resources.
Movie Tickets
A classic example of price discrimination involves this product. Usually the price at a movie theater changes if you are older or younger because of a differing willingness to pay.
Natural Monopoly
A monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms. Occurs because there are economies of scale over the relevant range of output. For example : Local Cable, Water distribution ,etc,.
economies of scale
Factors that cause a producer’s average cost per unit to fall as output rises, helps explain the natural monopoly.
Average Revenue
For competitive firms as well as monopolies _________ ________ equals the price of a good.
Marginal Revenue
A Monopolist’s ___________ ___________ is ALWAYS less than the price of its good, and by extension its Average Revenue.
output effect
The situation in which an increase in the price of one input will increase a firm’s production costs and reduce its level of output, thus reducing the demand for other inputs; conversely for a decrease in the price of the input.
price effect
After a price increase, each unit sold sells at a higher price, which tends to raise revenue, despite the inclination of people to buy goods at least in the case of a monopoly.
Marginal Revenue
_________ _________ in the case of monopolies is always less than the price, and because of that can even become negative as the Demand(average revenue) decreases.
profit maximizing
The monopolist _____ __________ quantity of output is determined by the intersection of the marginal revenue curve and the marginal cost curve. The price at that quantity is determined by a demand curve.
supply curve
Monopolies do not have a ________ _______. This is because they are price makers.
deadweight loss
The inefficiency of a monopoly causes a __________ ______. Similar to that created by Tariffs and taxes. This is because the monopoly charges higher than the marginal cost, which prevents mutually beneficial trade from taking place. In many ways a monopoly is like a private tax collector.
Price discrimination
the business practice of selling the same good at different prices to different customers, not possible when a good is sold in a competitive market, but does occur in monopolies.
arbitrage
The process of buying a good in one market at a low price and selling it in another market at a higher price. My brother does this all the time.
Perfect price discrimination
Describes a situation in which the monopolist knows exactly the willingness to pay of each customer and can charge each customer a different price (in this case, the monopolist charges each customer exactly his willingness to pay, and the monopolist gets the entire surplus in every transaction)
Discount Coupons
They may seem like a deal but _______ ________ allow companies to price discriminate. Also explains why Financial aid is a form of price discrimination.
Financial aid
A general term that includes all types of money, loans, and work-study programs offered to a student to help pay tuition, fees, and living expenses. Form of price discrimination.
Antitrust laws
Laws to minimize unfair competition. Illegal to conspire to fix prices, allocate customers or markets, limits market power and the deadweight losses created by monopolies.
Clayton Antitrust Act
1914 Act that corrected the problems of the Sherman Antitrust Act; outlawed certain practices that restricted competition; unions on strike could no longer be considered violating the antitrust acts.
Synergies
Benefits that are observed in some mergers resulting from a more efficient joint production model.
sunk costs
Costs that cannot be avoided because they have already been incurred. But don’t cry over spilled milk. You must ignore these costs when making rational decisions and remember to think at the margins.
Competitive Market
A market with many buyers and sellers trading identical products so that each buyer and seller is a price taker, sometimes defined as a perfectly competitive market. Also firms must have open access and open exit.
Average Revenue
Total revenue divided by the quantity sold, or in symbolic terms TR/ Q, on average the revenue added by selling one unit, also equals the price of the good.
Marginal Revenue
The extra revenue associated with the production and sale of one additional unit of output. For all competitive markets equals the price of the good, which also means that it equals average revenue.
Profit maximization
Primary goal of any firm - to earn the most profit possible from the sale of its goods or services. In order to do this most competitive firms do this by making sure MC=MR
Increase
If marginal revenue (MR) is greater than marginal cost (MC), then a firm should ________ its production because it will put more money in there pockets.
decrease
If marginal revenue (MR) is less than marginal cost (MC), then a firm should ________ its production because it will cost more money than they will gain in production.
Marginal-cost curve
A graphical representation showing how the cost of producing one more unit depends on the quantity that has already been produced, always an upward sloping line.
Horizontal
The price line in competitive markets will always be ___________ (think graphically) because everybody is a price taker.
Shutdown
A short-run decision not to produce anything during a specific period of time because of current market conditions. Firms that do this still have to pay fixed costs(like rent) which turn into sunk costs. A firm that takes this course of action will only do this if their TR(total revenue) is less than variable costs of production. Symbolically a firm will _______ if P
Exit
A long term decision to leave the market, distinguished from a shutdown which is a short term decision. In this mode the fixed costs are not sunk. In symbollic terms will only happen when TR(Total revenue) is less than TC(Total costs), when symplified if P>ATC.
greater
A firm will only enter the shutdown mode if their variable costs is ______ than their total revenue that they are producing
above
The competitive firm’s short run supply curve is the portion of its marginal cost curve that lies ______ average variable cost(AVC)
Profit
Can also be calculated symbolically as (P-ATC) x Q
zero
Firms that remain in a market must be making ______ economic profits, which like stated in an earlier quizlet are not the same as accounting profits
equality
The process of long run entry and exit ends only when ATC and Price are driven to _______. This happens because ATC curve is a measure of efficient scale, and that is where it is realized.
efficient scale
The quantity of output that minimizes average total cost
marginal firm
The firm that would exit the market if the price were any lower, is reflected as being used to calculate the ATC
elastic
Because firms can more easily enter and exit in the long run than in the short run the long term supply curve is typically more _______ than the short run supply curve.
Profit
Total Revenue - Total Cost or in symbolic terms P = TR - TC.
Explicit costs
Input costs that require an outlay of money by the firm (e.g. rent). Money that actually leaves a firm in the productive process. Distinguish from implicit costs.
Total revenue
The total amount of money a firm receives by selling goods or services symbolized by TR.
Total Cost
The market value of ALL the inputs a firm uses in production, symbolized by TC, is calculated by adding fixed costs and variable costs. Also depends on accounting perspective and economic perspective.
Implicit costs
Input costs that do not require an outlay of money by the firm (e.g. interest forgone on money used). The opportunity costs associated with a firm’s use of resources that it owns.
