Economics of work and leisure Flashcards
Abnormal Profit
Profit in excess of normal profit, total revenue is greater than total cost.
Allocative Efficiency
Where price is equal to marginal cost.
Average total cost/Unit cost of production
Total cost divided by output
Average product
Product produced by every worker when we divide the product by output.
Barrier of entry
Ostacle to new firms entering the market
Collusion
Where firms tacitly or otherwise agree to no compete on prices, services provision, and other matters which might adversely affect mutual well being
Competition and Markets Authority
Work to promote competition for the benefit of consumers aim, and make markets work well for consumers, businesses and the economy.
Con-testability
The extent to which barriers to entry and exit in a market are free and costless.
Diseconomies of scale
An increase in long run average costs caused by an increase in the scale of production.
Duopoly
Situation where two companies one all/nearly all the market for a given product or service.
Economies of Scale
A reduction in long run average costs resulting from an increase in the scale of an economy.
External Economies
Economies of scale which result from a growth in the industry and benefit from the firms within an industry.
Factors of production
Inputs used in the supply of goods and services. LAND LABOUR CAPITAL ENTREPRENEURSHIP
Fixed costs
Costs that do not change in the short run with changes in output, that are independent of output produced.
Hit and run pricing
Firms quickly entering a market when there are supernormal profits and leaving it when profits disappear
Horizontal Integration
Occurs when here is a merger between two firms in the same industry, operating at the same stage of the production
Internal Economies
(Diseconomies of scale) experienced by a firm caused by its growth
(Economies of scale)
experienced within a firms a result of growth
Kinked Demand Curve
A demand curve made up of two parts, it suggests oligopolist market, follow each others price reductions but no price rises
Law of diminishing marginal returns
Occurs in the short run when one factor is fixed if the variable factor of production increase, there comes a point where it becomes less productive, decrease in marginal product and average product.
Limit pricing
Setting a price low to discourage the entry of new firms into the market
Long run
Period of time when it is possible to alter all the factors of production
Marginal cost
The change in the total cost, resulting from changing output by one unit.
Marginal revenue
The change in the total revenue resulting in employing one more worker
Market
eg
Market concentration ratio
The percentage share of the market given the number of firms
MC=MR
At a certain level of output, e.g. X different between TC+TR is greatest
Monopolistic competition
A market structure in which there is a large number of small
