Chapter 22 Flashcards
An input whose quantity used in the production process is determined by the quantity of goods and services produced
Variable input
An input whose quantity used in the production process is a set amount in the production process regardless of hoe many goods or services are produced
Fixed input
The value of the last unit added
Marginal value
Resulting increase in output as a result of using additional inputs in a more efficient manner
Diminishing marginal product
Any process by which resources are transformed into goods and services
Production
At some point as equal units of input are added the increase in marginal output will decrease
DMP diminishing marginal product
Marginal cost
Change in output
Marginal cost
Marginal,production
Refers to decreases in long-run average costs resulting from increases in output
Economies of scale
Refers to increases in long-run average total costs resulting from increases in output
Diseconomies of scale
Lowest possible output for which the firm reaches its lowest long-run average total cost
Minimum efficient scale
What can be used to predict the likely market structure of a particular market
MES- minimum efficient scale
Product that is exactly the same
Homogeneous product
Producers have no ability to set price but must take price established by the market
Price taker
Demand curve for a perfectly competitive industry
Horizontal line
Characteristics of perfectly competitive firm
- Large amount of buyers and sellers
- Both buyers and sellers have access to the same information
- Product is homogeneous
- There are no barriers to entry
- Producers are price takers
Perfectly competitive market revenue is calculated
Total revenue = price x quantity
marginal costs = marginal revenue
Profit maximization for every firm in the industry
Return explicit and implicit costs and is a signal to others firms that entry into the market is a good thing
Economic profits
MC = ATC = AR = P = d
Break even price
Monopolist market structure
One seller
Absolute barriers of entry or exit
Unique product
Long-run economic profits
Monopolistic competitive structure
Large number of sellers Highly competitive Products not identical-- not perfect substitution-considerable product differentiation Easy entry no exit or entry barriers Some price stating ability No long economic profits
A few sellers - large number of buyers Sellers aware of competition Substantial entry/exit barriers Some price setting ability Long run economic profits possible Product differentiation continuous
Oligopoly market structure
What kind of market is considered to be the most efficient for resource allocation?
Competitive markets- perfect competition
