Final Exam Flashcards
Diminishing Marginal Returns
the decrease in the marginal output of production as input is incrementally increased
Fixed Cost
expenditure that must be made before production starts and that does not change regardless of the level of production
Marginal Product of Labour
the amount of output an additional worker can produce
Variable Costs
cost of production that increases with the quantity produced
Break-even Point
average total costs are equal to the market price, and the firm makes no money
Shut-down Point
average variable costs are greater than the market price, and the firm is unable to cover the variable costs of production
Entry
when firms enter a maarket enticed by positive profits, increasing supply and causing prices to fall
Exit
whe firms leave a market due to losses, decreasing supply and causing prices to rise
Economic Profits
total revenues minus total costs (including opportunity costs)
Accounting Profits
total revenues minus explicit costs, including depreciation
Average Product of Labour
the average amount of output each worker can produce; total product / total output
Average Total Cost
total cost divided by the quatity of output
Average Variable Costs
variable costs divided by quantity of output
Short Run
a period of time in which at least one cost factor is fixed
Total Cost
the sum of fixed and variable coassts of production
Long Run
the period of time when all costs are variable
Constant Returns to Scale
expanding all inputs proportionately does not change the average ccost of production
Deseconomies of Scale
the long-run average cost of producing each individual unit increases as total output increases
Long-Run Average Cost Curve
shows the lowest possible average cost of production, allowing all the inputs to production to vary so that the firm is choosing its production technology
Production Technologies
alternative methods of combining inputs to produce output
Short-Run Average Cost Curve
the average total cost curve in the short term; shows the total of the average fixed costs and the average variable costs
Marginal Revenue
the increase in revenue resulting from a marginal increase in quantity
Monopoly
a situation in which one firm produces all of the output in a market
Single-Priced Monopoly
a monopolist that can only charge one price
Perfect Price Discrimination
the action of selling the same product at a different price to each consumer, equal to their maximum willingness to pay
Price Discrimination
the action of selling the same product at different prices to maximize profits
Barriers to Entry
the legal, technological, or market forces that may discourage or prevent poetntial competitors from entering a market
Copyright
a form of legal protection to prevent copying, for commercial purposes, orginal works of authroship, including books and music
Deregulation
removing government controls over setting prices and quantities in certain industries
Intellectual Property
the body of law including patents, trademarks, copyrights, and trade secret law that protect the right of inventors to produce and sell their inventions
Legal Monopoly
legal prohibitions against competition, such as regulated monopolies and intellectual property protection
Natural Monopoly
economic conditions in the industry, for example, economies of scale or control of a critical resource, that limit effective competition
Patent
governemtn rule that givees the inventor the exclusive legal right too make, use, or sell the invention for a limited time
Predatory Pricing
when an existing firm uses sharp but temporary price cuts to discourage new competition
Trade Secrets
methods of production kept secret by the producing firm
Tradmark
an identifying symbol or name for a particular good and can only be used by the firm that registerred that trademark
Differentiated Products
a product that is perceived by consuemrs as distinctive in some way
Monopolistic Competition
many firms competing to sell similar but differentiated products
