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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
Fixed costs
Costs incurred by a firm that do not vary with the level of output
26
Game theory
A theory of how decision makers are influenced by the actions and reactions of others
27
Growth maximisation
The objective of increasing the side of the firm as much as possible
28
Hit and run entry
Firms can quickly enter a market where there are supernormal profits and leave it when the profits disappear
29
Increasing returns to scale
Output increases by a larger proportion than the increase in inputs during the production process
30
Innovation
The discovery of a new product or new process
31
Interdependence
Where the actions of one firm effect the sales and revenue of other firms within the market
32
Internal diseconomies of scale
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
Internal economies of scale
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
Invention
Turning the results of invention into a product or improves an existing product or process
35
Kinked demand curve
A demand curve made up of two parts, it suggests oligopolists follow each others price reductions, but not price rises
36
Labour productivity
The amount of real gross domestic product (GDP) productised by an hour of labour
37
Law of diminishing marginal returns
The decrease in the marginal output of a production process as the amount of a single factor of production is increased
38
Long-run (production theory)
A period of time when it is possible to alter all factors of production
39
Marginal cost (MC)
The cost of producing one additional unit of output
40
Marginal returns
The extra output derived per extra unit of a factor employed (usually labour)
41
Marginal revenue
The revenue gained from the scale of one extra unit
42
Medium of exchange
Money can be used to exchange goods and services and avoid the double coincidence of wants
43
Minimum efficient scale
The lowest level of output at which full advantage can be taken of economies of scale (optimal plant size)
44
Minimum profit constraint
The minimum profit constraint describes the minimum amount of profit a firm must make in order to satisfy their shareholders
45
Normal profit
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
Oligopoly
A market structure dominated by a few large firms
47
Price maker/ setter
A firm that influences price when it changes its output
48
Price maker/ setter
A firm that influences price when it changes its output
49
Price taker
A firm that has no influence on price
50
Principal-agent problem
Arises from the conflict between the objectives of the principles and their agents, who take decisions on their behalf
51
Principal-agent problem
Arises from the conflict between the objectives of the principles and their agents, who take decisions on their behalf
52
Productivity
Output per worker per unit of time
53
Profit
Total revenue minus total cost R-C
54
Profit maximisation
Achieving the highest possible profit where marginal cost equals marginal revenue MC=MR
55
Profit satisficing
Aiming for a satisfactory level of profit rather than the highest level of profit
56
Revenue maximisation
Achieving highest possible revenue when MR=0
57
Sales maximisation
Achieving the highest possible number of sales where AR=AC
58
Second degree price discrimination
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
Short-run (production theory)
A period of time where at least one factor of production, usually capital, is fixed in its supply
60
Short-run (production theory)
A period of time where at least one factor of production, usually capital, is fixed in its supply
61
Specialisation
The concentration of production on a narrow range of goods and services
62
Sunk costs
Costs incurred by a firm that cannot be recovered if the firm ceases trading
63
Third degree price discrimination
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
Total cost (TC)
The sum of all costs that are incurred in producing a given level of output
65
Total returns
Total output produced by a number of units of factors (usually labour) over a period of time
66
Total revenue
Total receipts from sales, price x quantity sold
67
Utility maximisation
The aim of trying to achieve as much satisfaction as possible
68
Variable costs
Costs that vary with the level of output
69
X-inneficiency
The difference between actual costs and attainable costs

econ (8 decks)

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