Chapter 2 Flashcards
Why is the peak of the average product curve the same as the trough of the average variable cost curve?
Bsh
What is the Marginal Product of Labour?
The additional output for each additional unit of labour.
What is the Marginal cost?
The Marginal cost is the cost of each additional unit of product.
What is average product?
The Average product of labour is the output produced per unit of labour.
Define: Increasing Returns to Scale.
As inputs (and therefore costs) rise by some factor, output rises by a larger factor.
Define: Constant returns to scale.
As inputs (and therefore costs) rise by some factor, output rises by the same factor.
Define: Decreasing Returns to Scale.
As inputs (and therefore costs) rise by some factor, output rises by a smaller factor.
Define: Concentrated industry.
Concentrated industries are those where a large fraction of the market is served by relatively few firms.
Define: Unconcentrated Industry.
Unconcentrated industries are those where no firm/group of firms dominate the market.
Define: Monopoly.
A Monopoly is where there is one firm with no competitors.
Define: Oligopoly.
An Oligopoly is a market with relatively few competitors.
What are the four conditions for perfect competition?
- Firms sell a standardised product.
- Firms are price takers.
- Free entry and exit.
- Firms and consumers have perfect information.
What does it mean for a firm to sell a standardised product?
The product that is sold by one firm is assumed to be a perfect substitute for the product sold by any other.
What does it mean if firms are price takers?
This means that the individual firm treats the market price of the product as a given.
What does “Free Entry and Exit” mean?
A firm with perfectly mobile factors of production in the long run.
