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Microeconomics > Booklet 4 > Flashcards

Booklet 4 Flashcards

1
Q

What is profit over and above normal profit called?

A

Abnormal/supernormal/economic profit

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2
Q

What is the average cost of producing one unit of output called?

A

Average (unit) cost

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3
Q

What is the amount of output produced per unit of a variable factor of production (i.e. productivity) called?

A

Average return

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4
Q

What is the average revenue a firm generates per unit sold called?

A

Average revenue

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5
Q

What is the acquisition of a business that is at an earlier stage of production (i.e. closer to the source of the raw material) in the same industry?

A

A backward vertical merger

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6
Q

What is a factor that makes it more difficult and/or expensive for new firm to enter a new market?

A

A barrier to entry

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7
Q

What is a factor that makes it more difficult and/or expensive to leave a market?

A

A barrier to exit

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8
Q

What is an economic system where the means of production are controlled by the private sector and operated in the pursuit of profit?

A

Capitalism

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9
Q

What is a merger between two firms with no common business interest?

A

A conglomerate merger

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10
Q

What is an increase in the quantity of all factors of production employed leads to a proportionate increase in output (e.g. 10% more factor inputs employed leads to a 10% increase in output) called?

A

Constant returns to scale

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11
Q

What is a market free from barriers to entry and exit?

A

A contestable market

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12
Q

What is the process where barriers to entry are removed from markets (usually by technological advances), allowing new firms to replace older ones and creating new markets out of nothing?

A

Creative destruction

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13
Q

What is a situation where an increase in the quantity of all factors of production employed leads to a less than proportionate increase in output (e.g. 10% more factor inputs employed leads to a 5% increase in output)?

A

Decreasing returns to scale

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14
Q

What is a situation where an increase in the quantity of one variable leads to a smaller increase in output that the addition of the previous unit called?

A

Diminishing marginal returns

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15
Q

What is an increase in long-run average costs arising from an increase in a firm’s scale of operations called?

A

Diseconomies of scale (internal)

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16
Q

What is an increase in long-run average costs arising from an increase in the size of an industry called?

A

Diseconomies of scale (external)

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17
Q

What is a scenario where the people who own a firm are not the same people that run it called?

A

The divorce between ownership and control

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18
Q

What is a reduction in long-run average costs arising from an increase in a firm’s scale of operations called?

A

Economies of scale (internal)

19
Q

What is a reduction in long-run average costs arising from the growth of an industry as a whole called?

A

Economies of scale (external)

20
Q

What is the growth of a firm through mergers and acquisitions called?

A

External growth

21
Q

What are costs that do not vary with output?

A

Fixed costs

22
Q

What is the acquisition of a business that is at a later stage of production (i.e. closer to the consumer) in the same industry called?

A

A forward vertical merger

23
Q

What is a merger between two firms at the same stage of production in the same industry called?

A

A horizontal merger

24
Q

What is a situation when an increase in the quantity of one variable input leads to a larger increase in output than the addition of the previous unit called?

A

Increasing marginal returns

25
Q

What is an increase in the quantity of all factors of production employed leads to a more than proportionate increase in output (e.g. 10% more factor inputs employed leads to a 20% increase in output) called?

A

Increasing returns to scale

26
Q

What is the exploitation of invention to create a product that can be marketed?

A

(Product) Innovation

27
Q

What is the growth of a firm without mergers or takeovers, e.g. through successful advertising or building additional factories called?

A

Internal (or organic) growth

28
Q

What is the discovery of new technology through research and development called?

A

Invention

29
Q

What is the period of time in which all factors of production become variable in quantity?

A

The Long run

30
Q

What is the change in total cost from the production of an additional unit of output (change in total cost/change in quantity sold)?

A

Marginal cost

31
Q

What is the change in total output from an additional unit of a variable factor of production?

A

Marginal return

32
Q

What is the change in total revenue from the sale of an additional unit of output (change in total revenue/change in quantity sold) called?

A

Marginal revenue

33
Q

What is the smallest scale of production at which average cost is minimised (the lowest point of the LRAC curve)?

A

The minimum efficient scale of production

34
Q

What is a level of profit which is just enough to cover the opportunity cost of the factors of production being used in their current employment called?

A

Normal profit

35
Q

What is a scenario where the agents (e.g. managers) appointed by the principal (e.g. shareholders) do not act as the principal would wish because they face different incentives called?

A

The principal-agent problem

36
Q

What is the exploitation of invention to create new ways of producing goods or services?

A

Process innovation

37
Q

What, in purely accounting terms, is an excess of revenue over costs?

A

Profit

38
Q

What is the period of time in which at least one factor of production is fixed in quantity?

A

The Short run

39
Q

What is the sum of total fixed costs and total variable costs?

A

Total cost

40
Q

What is the total output produced from a given quantity of a variable factor of production?

A

Total return

41
Q

What are the total receipts of a firm from the sale of its product (selling price x quantity sold) called?

A

Total revenue

42
Q

What are costs that vary directly with output?

A

Variable costs

43
Q

What is a firm that is able to continue operating without becoming insolvent, but constrained by large debts that it may only be able to pay the interest on called?

A

A Zombie company/firm

Microeconomics (7 decks)

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