Perfect markets definitions Flashcards
Define Economic loss.
- When total costs are greater than total revenue.
Define Economic profit
- Profit that is made in addition to normal profit.
- When average revenue is greater than average cost the firm makes an economic profit
What is Explicit costs?
- Actual expenditure of business, e.g. wages and interest
What is Implicit costs?
- Value of inputs owned by entrepreneur and used in the production process.
What is meant by Long run in markets?
- The period of production where all factors can change.
- The time is long enough for variable and fixed factors to change.
- It allows enough time for new firms to enter the industry and/or existing firms to exit.
What is a market?
- An institution that brings together buyers and sellers of goods or services
What is meant by Market structure?
How a market is organised
Explain Monopolistic competition
- A market structure in which businesses have many competitors, but each one sells a slightly different product (e.g. CD’s and books)
What is meant by Monopoly?
Exclusive control of a commodity or service in a particular market
Explain Normal profit
- The minimum earnings required to prevent an entrepreneur from leaving the industry.
- Normal profit: average revenue = average cost
Define Oligopoly
A market structure controlled by a small group of businesses
What is meant by Perfect competition?
A market structure with large numbers of producers and buyers
Define Price taker
- Has no influence on price.
- Takes price that is determined by the market
What is a Short run?
- The period of production where only the variable factors of production can change while at least one factor is fixed.
- The time period is too short to permit the number of firms in the industry to change.
Explain Shut-down point
- A business will shut down if it cannot meet its average or total variable costs.
- MC=AVC
What is The Competition Appeal Court?
- An institution whose main functions is to review orders made by the Competition Tribunal and amend or confirm these orders
What is The Competition Commission?
An institute that investigates:
* restrictive business practices,
* abuse of dominant positions
* mergers
in order to achieve equity in the South African economy
What is the The Competition Tribunal?
An institution whose main function is to:
* approve large mergers,
* adjudicate in the case of misconduct and
* issue orders on matters presented to it by the Competition Commission
