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Economics > Chapter 10-12 > Flashcards

Chapter 10-12 Flashcards

1
Q

Market Power

A

the ability of a firm to raise and maintain price above the level that would prevail under competition (restricting output in order to increase price)

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2
Q

Monopoly

A

the exclusive possession or control of the supply of or trade of a good or service

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3
Q

Oligopoly

A

when the industry is dominated by a few firms

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4
Q

Economic Cost

A

the economic cost of producing a good is the opportunity cost of the firm’s production

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5
Q

Fixed Cost

A

costs that don’t change as output increases

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6
Q

Variable Cost

A

costs that change as output increases

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7
Q

Marginal Cost

A

the cost to produce one more unit

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8
Q

Total Cost

A

TC = VC + FC for a certain output produced

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9
Q

Factors of Production

A

Land
Labor
Capital
Entrepreneurship

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10
Q

Explicit Costs

A

a direct payment made to others in the course of operating a business

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11
Q

Implicit Costs

A

the opportunity cost equal to what a firm must give up in order to use a factor of production for which it already owns

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12
Q

Normal Profits

A

zero profits

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13
Q

Abnormal Profits

A

positive profits

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14
Q

Losses

A

negative profits

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15
Q

Corporate Social Responsibility (CSR)

A

when the business includes the public’s interest in its decision making
- workforce
- consumers
- local community
- environment

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16
Q

Assumptions of Perfect Competition

A
  • industry is made of a lot of firms
  • firms have zero market power
  • all firms are small
  • products are homogeneous
  • no barriers to entry
  • everyone has perfect knowledge
  • perfectly elastic demand curve
  • long run all profits fall to zero
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17
Q

Assumptions of an Imperfect Market

A

When there is
- competition for market share
- differentiated products
- small number of suppliers (relevant to industry as a whole
- barriers to entry exist
- abnormal profits are possible in the long run

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18
Q

Stakeholders

A

any group affected by an industry

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19
Q

Non Price Competition

A

changes in ones business to attempt to gain an edge on competitors (non price involved)

20
Q

Economies of Scale

A

the cost advantages that enterprises obtain due to their scale of operation

21
Q

Satisficing

A

when an economic agent aims to perform satisfactorily rather than to a maximum level, in order to pursue other goals in life

22
Q

Growth Maximization

A

companies set their target for growth in the short run instead of profit in hopes of becoming a more dominant figure in the market in the long run

23
Q

Profit Maximizing Level of Output

A

producing where MC = MR

24
Q

Revenue Maximizing Level of Ouptput

A

producing at a rate when MR = 0

25
Q

Productively Efficient Level of Output

A

producing at a rate where MC = AC
- resources are not being wasted

26
Q

Allocatively Efficient Level of Output

A

producing at a rate where MC = AR
- when suppliers produce at the optimal amount for consumers
- socially optimal

27
Q

Assumptions of Monopolistic Competition

A
  • industry made pf fairly large number of firms
  • goods are differentiated
  • each firm is relatively small
  • each firm has a little bit of market power
  • perfect information
  • no barriers to entry
  • elastic demand
  • normal profits in the long run
28
Q

Assumptions for Monopolies

A
  • when they are the only firm producing a good
  • barriers to entry exist
  • abnormal profits in the long run
  • not socially optimal
  • no close substitutes of products
  • very high market power, can control price or output
  • profit maximizing level of output
29
Q

Long Run

A

period of time in which all factors of production are variable (all planning takes place in the long run)

30
Q

Short Run

A

period of time in which at least one factor of production is a fixed factor (all production takes place in the short run)

31
Q

Anti Competitive Behaviour

A

business or government practices that prevent or reduce competition in a market

32
Q

Specialization - EOS

A

having managers specialize into different areas of expertise

33
Q

Division of Labor - EOS

A

breaking down a production process into small easy tasks to increase efficiency

34
Q

Bulk Buying - EOS

A

negotiating discounts to buy large amounts of resources for cheaper prices

35
Q

Financial Economies - EOS

A

large firms are able to raise capital easier

36
Q

Transport Economies - EOS

A

large firms making bulk orders get charged less for transport or they may even create their own transport fleet

37
Q

Large Machines - EOS

A

by owning large machinery, firms can save more money over time

38
Q

Promotional Advertising - EOS

A

when advertisement is successful promotion cost per good falls

39
Q

Natural Monopoly

A

when there are only enough economies of scale to support one firm

40
Q

Legal Barriers

A

when a firm is given a legal right to be the only producer in an industry (the legal right to be a monopoly)

41
Q

Barriers to Entry

A

factors that can prevent or impede newcomers into a market or industry sector

42
Q

Brand Loyalty

A

customers who would choose a firm’s product of another cheaper alternative

43
Q

Assumptions of an Oligopoly

A
  • few firms dominate a majority of the market share
  • barriers to entry usually exist
  • goods may be homogeneous
  • there is interdependance
  • price is very rigid
  • abnormal profits possible in the long run
  • not socially optimal
44
Q

Collusion

A

when firms in an oligopoly collude to set higher prices

45
Q

Formal Collusion (Cartel)

A

when firms openly agree on a price they will charge (OPEC)

46
Q

Tacit Collusion

A

when firms in an oligopoly charge the same prices without any collusion

47
Q

Examples of Non-Price Competition

A
  • brand name
  • packaging
  • special features
  • advertising
  • sales promotion
  • personal selling
  • publicity
  • sponsorship deals
  • special distribution features

Economics (8 decks)

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