Econ: Chapter 7: Terms to Remember

Question 1

market power

Answer 1

The ability to alter the market price of a good or service.

Question 2

market demand

Answer 2

The total quantities of a good or service people are willing and able to buy at alternative prices in a given time period; the sum of individual demands

Question 3

patent

Answer 3

Government grant of exclusive ownership of an innovation

Question 4

monopoly

Answer 4

A firm that produces the entire market supply of a particular good or service.

Question 5

marginal revenue (MR)

Answer 5

The change in total revenue that results from a one-unit increase in quantity sold.

Question 6

profit maximization rule

Answer 6

Produce at that rate of output where marginal revenue equals marginal cost.

Question 7

production decision

Answer 7

The selection of the short-run rate of output (with existing plant and equipment).

Question 8

barriers to entry

Answer 8

Obstacles that make it difficult or impossible for would-be producers to enter a particular market (e.g., patents).

Question 9

marginal cost pricing

Answer 9

The offer (supply) of goods at prices equal to their marginal cost.

Question 10

economies of scale

Answer 10

Reductions in minimum average costs that come about through increases in the size (scale) of plant and equipment.

Question 11

natural monopoly

Answer 11

An industry in which one firm can achieve economies of scale over the entire range of market supply.

Question 12

contestable market

Answer 12

An imperfectly competitive industry subject to potential entry if prices or profits increase.