modul 12 Flashcards
What is the difference between short-run costs and long-run costs?
Short-run costs are costs that can be adjusted in the short term, while long-run costs are costs that can be adjusted in the long term.
How can total variable costs be computed?
Total variable costs can be computed by multiplying the wage per worker by the number of workers employed.
What is the relationship between marginal cost and total cost?
Marginal cost is the slope of the total cost curve
What is the formula for total cost?
Total cost (TC) = Total variable cost (TVC) + Total fixed cost (TFC)
What are fixed costs?
Fixed costs are costs that do not vary with output.
What is the relationship between marginal cost and average total cost/average variable cost?
Marginal cost is always greater than average total cost/average variable cost
What is the main assumption of the model of perfect competition?
Easy entry and exit
What are the basic assumptions of the model of perfect competition?
Price-taking behavior and identical products
What are the characteristics of goods in a perfectly competitive market?
Goods in a perfectly competitive market are homogeneous, meaning they are identical or indistinguishable from one another. This ensures that buyers have no preference for one seller’s product over another.
What do economists mean by perfect competition?
Perfect competition refers to a market structure where there are many buyers and sellers, homogeneous products, perfect information, ease of entry and exit, and no individual firm has the ability to influence the market price.
What is the U-shaped pattern of short-run average total cost and average variable cost curves?
The curves fall, then rise
What is the total variable cost (TVC)?
Cost that varies with the level of output
What are the costs associated with the use of variable and fixed factors of production?
Costs that vary with output and costs that do not vary with output
What is average variable cost (AVC)?
The firm’s variable cost per unit of output
Define total variable cost (TVC), total fixed cost (TFC), and total cost (TC).
Total variable cost (TVC) is the sum of all variable costs, total fixed cost (TFC) is the sum of all fixed costs, and total cost (TC) is the sum of total variable cost and total fixed cost.
What is the relationship between total cost and total variable cost curves in the range of increasing marginal returns?
They become flatter and flatter
What is the relationship between quantity of output and total cost?
Total cost increases as quantity of output increases
What does the marginal cost curve show?
The additional cost of each additional unit of output
What is the relationship between a firm’s total product curve and its total costs?
They are directly related
What is one of the basic assumptions of the model of perfect competition?
There is easy entry and exit in the industry
What is the central characteristic of the model of perfect competition?
Price is determined by demand and supply
What is the main characteristic of goods in a perfectly competitive market?
They are all alike and cannot be differentiated
What does the assumption of easy entry and exit imply in a perfectly competitive market?
There is a high degree of competition
What is the role of competition in serving consumer interests?
Competition benefits consumers by reducing economic profits
How does the number of buyers and sellers affect market competition?
The more buyers and sellers there are in a market, the more competitive the market becomes.
What is perfect competition?
A market with many firms selling identical products
What is price-taking behavior and why does it result from the assumptions of perfect competition?
Price-taking behavior refers to the fact that firms in a perfectly competitive market have no control over the market price and must accept the price determined by the market forces of supply and demand. This results from the assumption of a large number of buyers and sellers, where no individual firm can influence the market price.
Why do the assumptions of perfect competition imply price-taking behavior?
Because individual buyers and sellers have no influence over the market price
What is the role of competition in a perfectly competitive market?
To serve consumer interests and reduce economic profits
What is the relationship between the number of buyers and sellers and market competition?
More buyers and sellers lead to more competition
How does the number of buyers and sellers in a perfectly competitive market affect market price?
Buyers and sellers have no influence on market price
What factors contribute to easy entry and exit in a market?
Low barriers to entry and exit
Why is ease of entry and exit important in a perfectly competitive market?
Ease of entry and exit allows new firms to enter the market when there are economic profits to be made, and existing firms to exit the market when there are economic losses. This ensures that there is no long-term abnormal profit or loss in the market.
