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Economics A2 - Terms > Market Structures > Flashcards

Market Structures Flashcards

1
Q

Costs

A

the value of inputs

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2
Q

fixed costs

A

costs that are independent of output produced

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3
Q

variable costs

A

costs that are directly related to the level of output produced

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4
Q

total cost

A

The total cost of production of a good or provision of a service.
Total Cost = Fixed Cost + Variable Cost

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5
Q

Average cost

A

the unit cost of production

Average Cost = Total cost / quantity produced

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6
Q

Marginal cost

A

The change in total cost when one more unit of output is produced

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7
Q

‘Revenue’ as a vague concept

A

Receipts from sales

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8
Q

Total Revenue

A

quantity x price

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9
Q

Price taker

A

a firm in a competitive market that has to accept the market price

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10
Q

Price maker

A

a firm that has control over the market price

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11
Q

Average revenue

A

AR = total revenue / quantity

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12
Q

Marginal Revenue

A

addition to total revenue from one additional sale

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13
Q

Short run

A

time period when a firm is unable to change factors of production except for one, usually labour

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14
Q

Long run

A

Time period when all factor inputs can be changed

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15
Q

Minimum efficient scale

A

the lowest level of output where long-run average cost (LRAC) is minimised

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16
Q

Economies of scale

A

The benefits gained through producing on a larger scale

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17
Q

Technical economies

A

Increased capacity or a technological development that results in lower long-run average costs

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18
Q

Purchasing economies

A

reduced unit costs due to bulk buying of inputs into a business

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19
Q

Managerial economies

A

Savings in long run average costs due to the specialisation of management

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20
Q

Financial economies

A

the cost savings that large firms may receive when borrowing money

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21
Q

Diseconomies of scale

A

causes of an increase in LRAC beyond the point of minimum efficient scale

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22
Q

External economies of scale

A

Falling long run average costs that benefit all firms in an industry

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23
Q

Profit satisficing

A

where a firm makes a reasonable level of profit that satisfies its stakeholders without maximising profit

24
Q

Sales revenue maximisation

A

an objective where a firm produces where marginal revenue is zero.

25
Q

Profit maximisation

A

the objective of firms that is achieved where Marginal Cost = Marginal Revenue

26
Q

Sales maximisation

A

An objective that involves the maximisation of the volume of sales (to the point where average cost = average revenue).

27
Q

Cross-subsidisation

A

a business practice where revenue from profitable activities is used to support loss-making ones

28
Q

Profit

A

the difference between revenue and costs

29
Q

Normal profit

A

The level of profit that keeps a firm in a particular activity

30
Q

Supernormal profit

A

profit that is more than normal profit

31
Q

Market structure

A

the characteristics of a market

32
Q

n-firm Concentration ratio

A

the proportion of the total market shared between the (n)th largest firms

33
Q

Barrier to entry

A

obstacle to new firms entering a market

34
Q

Allocative efficiency

A

where Price is equal to Marginal Cost

35
Q

Productive efficiency

A
  • using the least possible scarce resources to produce the maximum output.
  • Where LRAC is minimised.
36
Q

Monopoly

A

A market characterised by a single firm having complete control over the supply.

37
Q

Natural monopoly

A
  • Where a monopolist has overwhelming cost advantage

- A market where LRAC are lowest when output is produced by a single firm

38
Q

Dynamic efficiency

A

where unit costs are lowered over time

39
Q

Contestable market

A

a set of conditions where there is always the threat of new firms being able to enter the market

40
Q

Contestability

A

the extent to which the barriers to entry and exit in a market are free and costless

41
Q

Contestable market

A

a market in which there are no barriers to entry and exit and the costs facing incumbent and new firms are equal.

42
Q

Price discrimination

A

Where a monopolist charges different prices for the same product in different markets

43
Q

Monopolistic competition

A

A market structure with many firms producing a differentiated product and where there are few barriers to entry and exit

44
Q

Product differentiation

A

where there are minor variations in the types of products on offer

45
Q

Deadweight loss

A

loss to society of the firm producing where price exceeds marginal cost

46
Q

Excess capacity

A

a consequence of firms producing at above the minimum point on the average cost curve.

47
Q

Non price competition

A

Competition between firms on the basis of, for example, branding, consumer service, location, range of products, advertising.

48
Q

Oligopoly

A

A market dominated by a few large firms

49
Q

Interdependent

A

where the actions of one firm provoke counter action by others

50
Q

Kinked demand

A

indicative of price rigidity in oligopoly

51
Q

Game theory

A

A means of modelling the behaviour of firms

52
Q

Collusion

A

where firms tacitly or otherwise agree to not compete on prices, service provision and other matters that might adversely affect mutual wellbeing

53
Q

Sunk costs

A

those costs that cannot be recovered if a firm ceases operation

54
Q

‘Hit and run’ entry

A

the way in which a firm enters a market where supernormal profits are being earned and leaves when profits return to normal

55
Q

Deregulation

A

removal of regulations

56
Q

Franchise

A

the outcome of a competitive system to bid for the provision of services

Economics A2 - Terms (8 decks)

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