Exam 3 Flashcards
The property whereby long-run average total cost increases as the quantity of output increases.
Diseconomies of Scale
The property whereby long-run average total cost decreases as the quantity of output increases.
Economies of Scale
The relationship between quantity of inputs used to make a good and the quantity of output of that good.
Production Function
The increase in output that arises from an additional unit of input.
Marginal Product
Total cost divided by the quantity of output.
Average Total Cost
Fixed cost divided by the quantity of output.
Average Fixed Cost
The increase in total cost that arises from an extra unit of production.
Marginal Cost
The property whereby long-run average total cost stays the same as the quantity of output changes.
Constant Returns to Scale
The quantity of output that minimizes average total cost.
Efficient Scale
Variable cost divided by the quantity of output.
Average Variable Cost
The property whereby the marginal product of an input declines as the quantity of the input increases.
Diminishing Marginal Product
A market with many buyers and sellers trading identical products so that each buyer and seller is a price taker.
Competitive Market
The change in total revenue from an additional unit sold.
Marginal Revenue
Total revenue divided by quantity sold.
Average Revenue
The profit maximization rule states that competitive firms should choose the level of production where ______ ______ equals ______ ______ .
Marginal Revenue
Marginal Cost
The business practice of selling the same good at different prices to different customers.
Price Discrimination
A regulatory scheme where regulators force the monopolist to break even and earn zero economic profit (this is not efficient).
Average Cost Pricing
A regulatory scheme where regulators force the monopolist to produce efficiently and where the price is below average total cost.
Marginal Cost Pricing
A monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms.
Natural Monopoly
A law passed in 1890 by the U.S. government that makes attempts to make monopolized industries illegal in the U.S.
Sherman Anti-Trust Act
A law passed in 1914 by the U.S. government that defines specific business practices that are illegal (like collusion and tying contracts).
Clayton Anti-Trust Act
A market structure in which many firms sell products that are similar but not identical.
Monopolistic Competition
The difference between price and marginal cost.
Markup
A situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen.
Nash Equilibrium
