econ part 2 Flashcards
marginal cost
increase in cost associated with one unit increase in output
marginal revenue
increase in revenue associated with a one unit increase in sales
rules for production
Quantity s.t production occurs when Marginal Cost = Marginal Revenue unless Price is less than Average Variable Cost, Quantity equals 0
diminishing returns
prod increase at decreasing rate because fixed capital
division of labor
production increase at increasing rate because dividing tasks
list one type of cost that would be both an accounting and an economic cost to the Widget-R-US business
cost of materials
list one type of cost that would be an economic cost but not an accounting cost for the Widgets-R-US business
lost wages from old job
list assumptions for perfect competition
many buyers/sellers such that no one can control price
identical products
perfect information on prices
free entry/ exit
describe why, when P>ATC, there is pressure on the price to fall
When Price is greater than Average Total Cost, it causes economic profit, which causes entry, that leads to an increase in number of sellers. supply curve moves to the right meaning price decreases.
discuss why there is pressure on prices such that economic profit goes to zero under perfect competition and monopolistic competition but not under oligopoly or monopoly
entry brings economic profit to zero in Perfect Competition and Monopolistic Competition but there is no entry in Monopoly & Oligopoly
Monopolistic Competition
several firms producing similar but not identical products
how is Monopolist Competition different from Perfect Competition
PC there are many firms selling identical products
why is Monopolistic Competition different from a Monopoly
Monopoly only has one firm. MC has a monopoly on their own brand but face competition.
Oligopoly
Competition among very few firms
Explain why it is that GDP, gross domestic production, only counts final sales
to avoid double counting of intermediate products
structural unemployment
unemployment that results from a skill being obsolete in a location
cyclical unemployment
unemployment that results from a temporary downturn in the economy
frictional unemployment
unemployment that results from the fact that it takes time to get an appropriate job
cost push inflation
inflation caused by a decrease in aggregate supply
Demand pull inflation
inflation caused by an increase in aggregate demand
explain the difference between real and nominal GDP, gross domestic pay
real adjusts nominal for inflation
list reasons the unemployment rate may not accurately reflect the problems of unemployment
underemployment: people work below their skill level and people working fewer hours than they would like
Discouraged worker effect
encouraged worker effect