Micro Econ Final Flashcards
Long Run
factors of production are variable
total costs
Fixed costs +variable costs
total revenue
price x quantity
Demand determinants
Income expectation preference demographics price of related goods distribution
shortage
When demand is higher than supply
Surplus
Quantity demand is greater than supply
the law of increasing costs
as the economies production of a product increases the per unit cost of production rises
Normal profits
the minimum amount of profits that are earned to keep the business running
fair return price
a price that guarantees a firm will make normal profits only
fair return on the graph
where Average costs intersect Demand
socially optimum price
the price that produces the best allocation of resources
socially optimum price on the graph
Where marginal costs intersect Demand
Marginal Revenue
the extra revenue derived from the sale of one or more units
monopolist profit maximization
when marginal cost equals marginal revenue
the output on the graph
where Marginal Cost intersects with Marginal revenue
what factors distinguish an oligopoly
- few competitors
- advertising
- sell similar products
what price does a monopolistically competitive firm charge?
price greater than marginal cost
short run
a period of time in which factors are fixed
Profit-maximizing output on a graph
Where MR and MC intersects, the price is found by drawing a line to the demand curve
Break-even on a graph
Where MR and ATC intersects
average profit
total profit divided by quantity
total profit
the difference between AR and AC times the output
Economic capacity
lowest average total cost
point of maximum productivity
Lowest average cost
Point of diminishing returns
lowest marginal cost
socially optimum price
the price which ensures the best allocation of products
monopolistic competition
the term for a market structure in which there are many firms who sell a different product and have some control over the price of the product they sell
what is profit maximization criteria for a monopolistic firm
Marginal revenue equals marginal cost
horizontal demand curve
elastic demand
verticle demand curve
perfectly inelastic
verticle supply curve
perfectly inelastic
horizontal supply curve
perfectly elastic supply
unitary elastic
the point where percentage change in quantity is exactly equal to the percentage change in price
unitary elastic coefficient
1
unitary elastic curve
a curved line, C shaped
cross elasticity of demand
how the quantity demanded of product A responds to a change in the price of product B
perfectly inelastic
price change doesn’t affect demand, for example, electricity, gas, water
perfectly elastic
price change affects quantity demanded.example pizza, restaurants
Perfectly elastic coefficient
∞
perfectly inelastic coefficient
0
consumer surplus
the difference between what a customer is willing to pay and the actual price of the product
the marginal rate of substitution
the amount of one good a consumer is willing to give up to get more one unit of another good and still maintain the same level of satisfaction.
the marginal rate of substitution
the amount of one good a consumer is willing to give up to get more one unit of another good and still maintain the same level of satisfaction.
excess capacity
the situation in which a firms output is below economic capacity
constant return to scale
a firms output increases by the same percentage as the increase in its inputs
increasing returns to scale
a firms output increases by a greater percentage than the increase in its inputs
economies of scale
coat advantage achieved as a result of larger scale operations
decreasing return to scale
a situation in which a firms output increases by a smaller percentage than the increase to its inputs
many firms
perfect competition
monopolistic competition
few firms
differentiated oligopoly
undifferentiated oligopoly
one firm
monopoly
perfect competition
a market in which buyers and sellers are price takers
economic profit on a curve
where TR and TC has the greatest distance from each other
shutdown price
the price that is just sufficient to cover a firm’s variable costs
market failure
the defect in competitive markets that prevent them from achieving an efficient or equitable allocation pf resources
imperfect competition
a market in which producers are identifiable and have some control over price
monopolistic competition
a market in which there are many firms that sell a differentiated product
nash equilibrium
a situation in where each rival chooses the best actions given the anticipated actions of the others
marginal wage cost
the extra cost of hiring an additional employee
common property resources
resources not owned by an individual or firm
terms of trade
the average price of a countries exports compared with the price of its imports
4 resources in the production of goods
land
labour
entrepreneurship
capital
when is the percentage change in quantity exactly equal to the percentage change in price
when the demand is unitary elastic
The coefficient is greater than 1
elastic
why might a good harvest be bad news for farmers
because the demand for many basic agricultural products is very inelastic
implicit costs
costs that are not actually paid out in money
what do economists consider the true costs of doing business
explicit costs plus implicit costs
what causes marginal costs to rise
the fact that ATC increases
what is the long run average cost curve
graphic representation of the average cost of production in the long run
inferior good
a product which demand falls if income rise
