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economics chapter 3 micro > definitions > Flashcards

definitions Flashcards

1
Q

Medium of exchange

A

money can be used to exchange, goods and services and avoid the double coincidence of
wants

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2
Q

Normal profit

A

The minimum level of profit needed to keep a firm in the market in the long run

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3
Q

Price maker

A

Affirm the influences price when it changes its output

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4
Q

Price taker

A

Affirm that has no influence on the price

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5
Q

Productivity

A

Output per worker per unit of time

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6
Q

Profit maximisation

A

achieving the highest possible profit where MC=MR

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7
Q

short run

A

A period of time, during which, at least one factor of production is fixed in its supply (usually capital)

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8
Q

Long run

A

A period of time, during which all factors of production are fixed in its supply

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9
Q

total revenue

A

Price x quantity sold

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10
Q

Barriers to entry

A

Obstacles that prevent new competitors from easy The, entering in an industry or area of business

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11
Q

Barriers to exit

A

obstacles in the part of a firm, which wants to leave a given market or industrial sector

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12
Q

supernormal profit

A

A payment over and above normal profit
For example, profit where AR>AC

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13
Q

economies of scale

A

where an increase in the scale of production leads to a decrease in LRAC

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14
Q

Dis economies of scale

A

where an increase in the scale of production leads to an increase in LRAC

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15
Q

external disceconomies of scale

A

when an increase in the scale of production leads to a increase in LRAC due to growth of the industry in which the firm operates

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16
Q

external economies of scale

A

When an increase in the scale of production lead to a decrease in LRAC due to growth of the industry in which the firm operates

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17
Q

Internal economies of scale

A

when an increase in the scale of production leads to a decrease in LRAC, due to the growth of the firm itself

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18
Q

internal diseconomies of scale

A

When an increase in the scale of production leads to an increase in LRC due to growth of the firm itself

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19
Q

Law of diminishing marginal returns

A

The decrease in the marginal output of a production process, as the amount of a single factor of production is increased

20
Q

Marginal returns

A

The extra output derived per extra unit of factor employed (usually labour)

21
Q

increasing returns to scale

A

output increases by a larger proportion than the increase in inputs during the production process

22
Q

constant returns to scale

A

output increases by an equal proportion to the increase in inputs during the production process

23
Q

decrease returns to scale

A

output increase by a lower proportion than increase in inputs during the production process

24
Q

concentration ratio

A

the percentage of an industry which can be accounted for by the largest firms

25
Q

constestable market

A

A market in which there are no barriers to entry and exit, and the costs facing both incumbent and new firms are equal

26
Q

hit and run entry

A

Firms can quickly enter a market where there are supernormal profits, and leave it when the profits disappear

27
Q

Sunk costs

A

costs incurred by a firm, that cannot be recovered, if the firm Ceases trading

28
Q

features of perfect competition

A

– Many firms

– Homogenous products

– Normal profit (long run)

– Perfect information

– No barriers to entry or exit

– Price competition only

– Price takers

29
Q

features of monopolistic competition

A

– Some unique products

– Many firms

– Normal profit (long run)

– Low barriers to entry or exit

– Price and non-price competition

– Some price setting power

30
Q

features of an oligopoly

A

– Very few firms

– Some unique products

– Supernormal profit

– Imperfect information

– High barriers to entry or exit

– Price and non-price competition

– Interdependence

– price makers

31
Q

features of monopoly

A

– One firm

– Unique products

– supernormal profit

– High barriers to entry

– Price and non-price competition

– Price makers

– Imperfect information

32
Q

Features of a contestable market

A

– No brand loyalty

– No barriers to entry or exit

– No supernormal profits (long run)

– Hit and run entry

– Same costs and tech for New and existing firms

– no sunk costs

– Allocative and productive efficiency

– No dynamic efficiency

– Lack of collusion

33
Q

division of labour

A

A process whereby the production procedure is broken down into a sequence of stages, and workers are assigned to particular stages

34
Q

dominant strategy

A

a strategy that earns a player a larger payoff, irrespective of what other players do

35
Q

dynamic efficiency

A

form of productive efficiency that benefits a firm over time ( in terms of developing a new product )

36
Q

first degree PD

A

where different prices are given to individual customers for the same product for reasons not associated with cost

37
Q

game theory

A

a theory of how decision makers are influenced by the actions and reaction of others

38
Q

interdependence

A

where the actions of one firm effects the sales and revenue of other firms within the market

39
Q

kinked demand curve

A

a demand curve made up of 2 parts, it suggests oligopolists follow each others price reductions but not price rises

40
Q

oligopoly

A

market stucture dominated by few large firms

41
Q

profit satisficing

A

aiming for a satisfactory level of profit rather than the highest level of profit possible

42
Q

Second-degree price discrimination

A

Where different prices are charged for different quantities of of a product, larger quantities may be available at a lower price

43
Q

X. Inefficiency.

A

The difference between actual cost and attainable costs

44
Q

3rd° price discrimination

A

Where the same product is sold to different consumers in different markets are different prices. These consumers may be grouped by characteristics.

45
Q

Specialisation

A
46
Q

natural monopoly

A

Average cost diminishes over a large range of output as there are very high fixed costs that are spread out over increasing levels of output

economics chapter 3 micro (6 decks)

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