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econ > micro(yellow) > Flashcards

micro(yellow) Flashcards

1
Q

Abnormal/ supernormal profit

A

A payment over and above normal profit: the profit earned when average revenue EXCEEDS average cost

basically AR>AC

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2
Q

Average cost

A

Total cost divided by output
(cost per unit)

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3
Q

Average fixed cost

A

Total fixed cost divided by output
(fixed cost per unit)

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4
Q

Average returns

A

Output per factor (usually labour) over a period of time

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5
Q

Average revenue

A

Revenue divided by output
(revenue per unit)

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6
Q

Average variable cost

A

Total variable cost divided by output
(variable cost per unit)

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7
Q

Barriers to entry

A

Obstacles that prevent new competitors from easily entering an industry or area of business

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8
Q

Barriers to exit

A

Obstacles in the path of a firm which wants to leave a given market or industrial sector

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9
Q

Concentration ratio

A

The percentage of industry market share which is accounted for by the largest firms

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10
Q

Constant returns to scale

A

Output increases by an equal proportion to the increase in inputs during the production process

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11
Q

Contestable market

A

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

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12
Q

Corporate social responsibility

A

Actions that a firm takes in order to demonstrate its commitment to behaving in the public interest

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13
Q

Creative destruction

A

Capitalism is in a state of constant flux where instability is the price we pay for wealth and generative renewal and reinvention driven by entrepreneurs

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14
Q

Decreasing returns to scale

A

Output increases by a lower proportion than the increase in inputs during the production process

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15
Q

Diseconomies of scale

A

Where an increase in the scale of production leads to an INCREASE in LRAC

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16
Q

Divorce of ownership and control

A

In large corporations, shareholders own the firm but may not be able to excessive control. Managers often have control and have different objectives to shareholders

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17
Q

Division of labour

A

A process whereby the production procedure is broken down into a sequence of stages, and workers are assigned to particular stages ( ADAM SMITH)

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18
Q

Dominant strategy

A

A strategy that earns a player a larger payoff, irrespective of what other players do

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19
Q

Double coincidence of wants

A

A term used to describe a problem with a barter economy. Consumers need to find someone who wants what they have and simultaneously, has something they want

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20
Q

Dynamic efficiency

A

A form of productive efficiency that benefits a firm over time (in terms of developing and introducing new production techniques and products)

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21
Q

Economies of scale

A

Where an increase in the scale of production leads to a FALL in LRAC

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22
Q

External diseconomies of scale

A

When an increase in the scale of production leads to a rise in long run average cost due to growth of the industry in which the firm operates

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23
Q

External economies of scale

A

When an increase in the scale of production leads to a fall in long run average cost due to growth of the industry in which the firm operates

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24
Q

First degree price discrimination

A

Where different prices are given to individual customers for the same product for reasons not associated with costs

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25
Q

Fixed costs

A

Costs incurred by a firm that do not vary with the level of output

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26
Q

Game theory

A

A theory of how decision makers are influenced by the actions and reactions of others

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27
Q

Growth maximisation

A

The objective of increasing the side of the firm as much as possible

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28
Q

Hit and run entry

A

Firms can quickly enter a market where there are supernormal profits and leave it when the profits disappear

29
Q

Increasing returns to scale

A

Output increases by a larger proportion than the increase in inputs during the production process

30
Q

Innovation

A

The discovery of a new product or new process

31
Q

Interdependence

A

Where the actions of one firm effect the sales and revenue of other firms within the market

32
Q

Internal diseconomies of scale

A

When an increase in the scale of production leads to a rise in long run average cost, due to growth of the firm itself

33
Q

Internal economies of scale

A

When an increase in the scale of production leads to a fall in long run average cost, due to growth of the firm itself

34
Q

Invention

A

Turning the results of invention into a product or improves an existing product or process

35
Q

Kinked demand curve

A

A demand curve made up of two parts, it suggests oligopolists follow each others price reductions, but not price rises

36
Q

Labour productivity

A

The amount of real gross domestic product (GDP) productised by an hour of labour

37
Q

Law of diminishing marginal returns

A

The decrease in the marginal output of a production process as the amount of a single factor of production is increased

38
Q

Long-run (production theory)

A

A period of time when it is possible to alter all factors of production

39
Q

Marginal cost (MC)

A

The cost of producing one additional unit of output

40
Q

Marginal returns

A

The extra output derived per extra unit of a factor employed (usually labour)

41
Q

Marginal revenue

A

The revenue gained from the scale of one extra unit

42
Q

Medium of exchange

A

Money can be used to exchange goods and services and avoid the double coincidence of wants

43
Q

Minimum efficient scale

A

The lowest level of output at which full advantage can be taken of economies of scale (optimal plant size)

44
Q

Minimum profit constraint

A

The minimum profit constraint describes the minimum amount of profit a firm must make in order to satisfy their shareholders

45
Q

Normal profit

A

The minimum level of profit needed to keep a firm in the market in the long run (AR=AC) …basically when revenue equals cost

46
Q

Oligopoly

A

A market structure dominated by a few large firms

47
Q

Price maker/ setter

A

A firm that influences price when it changes its output

48
Q

Price maker/ setter

A

A firm that influences price when it changes its output

49
Q

Price taker

A

A firm that has no influence on price

50
Q

Principal-agent problem

A

Arises from the conflict between the objectives of the principles and their agents, who take decisions on their behalf

51
Q

Principal-agent problem

A

Arises from the conflict between the objectives of the principles and their agents, who take decisions on their behalf

52
Q

Productivity

A

Output per worker per unit of time

53
Q

Profit

A

Total revenue minus total cost
R-C

54
Q

Profit maximisation

A

Achieving the highest possible profit where marginal cost equals marginal revenue
MC=MR

55
Q

Profit satisficing

A

Aiming for a satisfactory level of profit rather than the highest level of profit

56
Q

Revenue maximisation

A

Achieving highest possible revenue
when MR=0

57
Q

Sales maximisation

A

Achieving the highest possible number of sales
where AR=AC

58
Q

Second degree price discrimination

A

When firms charge different prices for different consumers for the same good based on the quantity purchased, larger quantities may be available at a lower unity price, e.g. ‘buy one get one free’ ‘bulk discounts’

59
Q

Short-run (production theory)

A

A period of time where at least one factor of production, usually capital, is fixed in its supply

60
Q

Short-run (production theory)

A

A period of time where at least one factor of production, usually capital, is fixed in its supply

61
Q

Specialisation

A

The concentration of production on a narrow range of goods and services

62
Q

Sunk costs

A

Costs incurred by a firm that cannot be recovered if the firm ceases trading

63
Q

Third degree price discrimination

A

Where the same product is sold at different consumers in different markets at different prices. These consumers may be grouped by charactersistics; age, occupation, region or time

64
Q

Total cost (TC)

A

The sum of all costs that are incurred in producing a given level of output

65
Q

Total returns

A

Total output produced by a number of units of factors (usually labour) over a period of time

66
Q

Total revenue

A

Total receipts from sales, price x quantity sold

67
Q

Utility maximisation

A

The aim of trying to achieve as much satisfaction as possible

68
Q

Variable costs

A

Costs that vary with the level of output

69
Q

X-inneficiency

A

The difference between actual costs and attainable costs

econ (8 decks)

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