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Microeconomics > Final Exam > Flashcards

Final Exam Flashcards

1
Q

cost that requires an outlay of money

A

explicit cost

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2
Q

cost measured by value in dollar terms of benefits that are forgone

A

implicit cost

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3
Q

explicit cost + implicit cost

A

opportunity/economic cost

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4
Q

revenue - explicit cost

A

accounting profit

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5
Q

revenue - economic cost

A

economic profit

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6
Q

economic profit is usually … than accounting profit

A

less

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7
Q

total value of assets owned by an individual or firm

A

capital

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8
Q

opportunity cost of the use of one’s own capital, income earned if the capital had been used in the next-best alternative use

A

implicit cost of capital

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9
Q

when making an either-or choice between two activities, choose the choice…

A

with positive economic profit

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10
Q

additional cost incurred by producing one more unit of a good or servivce

A

marginal cost

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11
Q

when each additional unit costs more to produce than the previous one

A

increasing marginal cost

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12
Q

when each additional unit costs the same to produce as the previous one

A

constant marginal cost

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13
Q

quantity that generates the highest possible total profit

A

optimal quantity

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14
Q

when making a profit-maximizing how much decision, optimal quantity is..

A

the largest quantity at which marginal benefits are greater than or equal to marginal costs

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15
Q

cost that has already been incurred and is nonrecoverable, should be ignored in decisions about future actions

A

sunk cost

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16
Q

profit=

A

revenue - cost

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17
Q

if the marginal cost is positive, total costs are…

A

increasing

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18
Q

if the marginal benefit is positive, total benefits are…

A

increasing

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19
Q

when profit is more than 0, resources move…

A

into the industry

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20
Q

when profits are equal to 0, resources…

A

do not move

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21
Q

when profits are less than 0, resources move…

A

out of the industry

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22
Q

what do time horizons determine

A

choices available for firms

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23
Q

quantity of an input is fixed, at least one input is fixed

A

short run

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24
Q

inputs can vary over time, all inputs can be varied

A

long run

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25
Q

inputs that do not change, given quantity

A

fixed inputs

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26
Q

inputs whose quantity change, affects the amount of output

A

variable inputs

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27
Q

change in total output as you change variable factor by one

A

marginal product

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28
Q

declining marginal product due to an increase in the variable factor

A

diminishing returns

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29
Q

marginal costs are found by…

A

change in total costs/change in output

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30
Q

average costs are found by…

A

total costs/quantity

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31
Q

lowest average costs at which you are able to product the quantity with varying inputs

A

long run average costs

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32
Q

what does economics of scale cause

A

average long run costs decline, hit minimum, then increase

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33
Q

relationship between the quantity of inputs a firm uses and the quantity of output it produces

A

production function

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34
Q

shows how the quantity of output depends on the quantity of the variable input, for a given quantity of the fixed input

A

total product curve

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35
Q

cost that does not depend on the quantity of an output produced, cost of fixed input

A

fixed cost

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36
Q

cost that depends on the quantity of output produced, cost of variable input

A

variable cost

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37
Q

total cost is the sum of

A

fixed costs and variable costs

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38
Q

total cost per output unit

A

average (total) cost

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39
Q

how is average (total) cost found

A

total cost/quantity

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40
Q

fixed cost per unit of output

A

average fixed cost

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41
Q

how is average fixed cost found

A

fixed cost/quantity

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42
Q

variable cost per unit of output

A

average variable cost

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43
Q

how is average variable cost found

A

variable cost/quantity

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44
Q

quantity of output at which average total cost is lowest

A

minimum-cost output

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45
Q

relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output

A

long-run average total cost curve

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46
Q

long-run average total cost declines as output increases

A

increasing returns to scale

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47
Q

long-run average total cost increases as output increases

A

decreasing returns to scale

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48
Q

long-run average total cost is constant as output increases

A

constant returns to scale

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49
Q

minimum of quantities of scale, lowest long run average costs

A

minimum efficient scale

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50
Q

market in which all market participants are price-takers

A

perfectly competitive market

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51
Q

producers whose actions have no effect on the market price of the good or service it sells

A

price-taking producers

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52
Q

consumer whose actions have no effect on the market price of the good or service they buy

A

price-taking consumer

53
Q

perfect competition- firm condition

A

many producers, none of whom have a large market share

54
Q

fraction of the total industry output accounted for by that producer’s output

A

market share

55
Q

perfect competition- product condition

A

every firm produces a standardized product

56
Q

when consumers regard the product of different producers as the same good

A

standardized product/commodity

57
Q

perfect competition- entry and exit condition

A

there are no obstacles to free entry and exit

58
Q

when new producers can easily enter into an industry and existing producers can easily leave that industry

A

free entry and exit

59
Q

industry that only has one good which has no close substitutes

A

monopoly

60
Q

ability of a firm to raise prices above the competitive level by reducing output

A

market power

61
Q

something that prevents other firms from entering the industry

A

barriers to entry

62
Q

type of barrier to entry, one firm controls a specific input

A

control of a scarce resource or input

63
Q

type of barrier to entry, existing and larger firms have lower costs

A

increasing returns to scale

64
Q

type of barrier to entry, one firm is more advanced than the others

A

technological superiority

65
Q

type of barrier to entry, value of a good or service to an individual is greater when many people use the same good or service

A

network externality

66
Q

type of barrier to entry, patents and copyrights

A

government-created barriers

67
Q

gives an inventor a temporary monopoly in the use of sale of an invention

A

patent

68
Q

gives the creator of a literary or artistic work the sole right to profit from that work

A

copyright

69
Q

when no one firm has a monopoly so they must compete, but producers still have some market power and can affect prices

A

imperfect competition

70
Q

when sellers cooperate to raise their joint profits instead of competing

A

collusion

71
Q

collusion is a key to which market structure

A

oligopoly

72
Q

profit is maximized by producing quantity of output where MR=MC

A

optimal output rule

73
Q

profit is maximized by producing the quantity of output at which the market price is equal to the marginal cost, P=MC

A

price-taking firm’s optimal output rule

74
Q

market price where a price-taking firm’s profit is zero

A

break-even price

75
Q

for price-taking firms, when the market price is greater than the minimum average total cost the firm is

A

profitable

76
Q

for price-taking firms, when the market price is less than the minimum average total cost the firm is

A

unprofitable

77
Q

for price-taking firms, when the market price is equal to the minimum average total cost the firm is

A

breaks even

78
Q

a firm should cease production when price falls below the minimum average variable cost

A

shut-down rule

79
Q

price at which firms cease production in the short run

A

shut-down price

80
Q

when price lies between the minimum average total cost and minimum average variable cost, the firm…

A

produces in the short run to minimize loss

81
Q

what are the two short run dimensions

A

number of firms, closeness of goods

82
Q

what is the one long run dimension

A

conditions of entry and exit

83
Q

perfect competition- market power condition

A

no market power

84
Q

monopolistic competition- firm condition

A

large amount of firms

85
Q

monopolistic competition- product condition

A

differentiated products

86
Q

monopolistic competition- market power condition

A

small amount of market power

87
Q

monopolistic competition- entry and exit condition

A

very low barriers, free entry and exit

88
Q

oligopoly- firm condition

A

few large firms

89
Q

oligopoly- product condition

A

identical or differentiated products

90
Q

oligopoly- market power condition

A

lots of market power, mutual interdependence, collusion

91
Q

oligopoly- entry and exit condition

A

significant barriers to new firms

92
Q

monopoly- firm condition

A

one firm

93
Q

monopoly- product condition

A

single product with no substitutes

94
Q

monopoly- market power condition

A

considerable market power

95
Q

monopoly- entry and exit condition

A

blocked by barriers that prevent new firms, no entry

96
Q

what is the elasticity of perfect competition

A

perfectly elastic

97
Q

in perfect competition, marginal revenue and market price are

A

equal

98
Q

in perfect competition, when profits are more than 0 the firm should

A

produce Q*

99
Q

in perfect competition, when profits are equal to 0 the firm should

A

produce Q*

100
Q

in perfect competition, when profit are less than 0 the firm should

A

pick the decision that minimizes the losses

101
Q

if the supply goes down, the price and profit

A

go up

102
Q

if the supply goes up, the price and profit

A

go down

103
Q

what is the long run outcome for profit in perfect competition

A

zero profit

104
Q

what is the efficiency of perfect competition

A

effient

105
Q

when does producing instead of shutting down minimize costs

A

when the profit of producing Q* is greater than the variable costs

106
Q

in monopolistic competition, oligopoly, and monopoly how do marginal revenue and price compare

A

marginal revenue is less than price

107
Q

how does product differentiation affect advertising

A

more differentiation=more advertising

108
Q

when one more unit is sold, there is an increase in revenue by price

A

quantity effect in monopoly

109
Q

in order to sell last unit, market price must be cut down for all units

A

price effect in monopoly

110
Q

at low levels of output in monopoly, the quantity effect is…

A

stronger than the price effect

111
Q

at high levels of output in monopoly, the price effect is…

A

stronger than the quantity effect

112
Q

when MR is greater than MC, increase profit by

A

producing more

113
Q

when MR is less than MC, increase profit by

A

producing less

114
Q

when economies of scale provide a large cost advantage to a single firm that produces all of an industry’s output

A

natural monopoly

115
Q

good is supplied by the government, set prices based on efficiency, have high cost and low quality

A

public ownership

116
Q

government limiting the firms by limiting the price that can be charged

A

regulation

117
Q

long run equilibrium for perfect competition

A

profits=0

118
Q

why are monopolies not efficient

A

deadweight loss to society, ATC is not minimum

119
Q

monopolists can earn profits in

A

the short and long runs

120
Q

charging different prices to different consumers in order to increase profits

A

price discrimination

121
Q

when the pricing and production decisions of one firm significantly affect the profits of its rivals

A

interdependence

122
Q

firms cooperating to raise their joint profits

A

collusion

123
Q

agreement among several producers to obey output restrictions and increase their joint profits

A

cartel

124
Q

when firms ignore the effects of their actions on each others’ profits

A

noncooperative behavior

125
Q

when firms limit production and raise prices in a way that raises one another’s profits even though there is not a formal agreement

A

tacit collusion

126
Q

what are the ways products are differentiated

A

style/type, location, quality

127
Q

producing less than the output at which average total cost is minimized

A

excess capacity

128
Q

conditions for price discrimination to hold

A

must separate the groups, must prevent resale of product

129
Q

charging everyone the amount that they are willing to pay, supplier gets all consumer surplus

A

perfect price discrimination

Microeconomics (7 decks)

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