Quiz 7 Flashcards
the change in total revenue generated by an additional unit of output
marginal revenue
a firm in an industry with only a small number of producers
oligopolist
an industry with only a small number of producers
Oligopoly
when no one firm has a monopoly, but producers nonetheless realize that they can affect market prices, an industry is characterized this
imperfect competition
the exclusive legal right of the creator of a literary or artistic work to profit from that work; like a patent, it is a temporary monopoly
copyright
something that prevents other firms from entering an industry. Crucial in protecting the profits of a monopolist. There are four types of these: control over scarce resources or inputs, increasing returns to scale, technological superiority, and government-created barriers such as licenses
barriers to entry
a cost that does not require the outlay of money; it is measured by the value, in dollar terms, of forgone benefits
implicit cost
the opportunity cost of the capital used by a business; that is the income that could have been realized had the capital been used in the next best alternative way
Implicit cost of capital
the square of each firm’s share of market sales summed over the industry. It gives a picture of the industry market structure.
Herfindahl-Hirschman Index
a monopoly that exists when increasing returns to scale provide a large cost advantage to having all output produced by a single firm
natural monopoly
a cost that involves actually laying out money
explicit cost
an industry controlled by a monopolist
monopoly
describes an industry that potential producers can easily enter or current producers can leave
Free entry and exit
an economic profit equal to zero. It is an economic profit just high enough to keep a firm engaged in its current activity
Normal profit
the proposition that the optimal quantity is the quantity at which marginal benefit is equal to marginal cost
Principle of marginal analysis
measure the percentage of industry sales accounted for by the “X” largest firms
concentration ratios
a business’s revenue minus the explicit cost and depreciation
accounting profit
a market structure in which there are many competing firms in an industry, each firm sells a differentiated product, and there is free entry into and exit from the industry in the long run
monopolist competition
a business’s revenue minus the opportunity cost of resources; usually less than the accounting profit
economic profit
a firm that is the only producer of a good that has no close substitutes
monopolist
a temporary monopoly given by the government to an inventor for the use or sale of an invention
patent
a good is a standardized product; when consumers regard the products of different forms as the same good
commodity
a graphical representation showing how the cost of producing one more unit depends on the quantity that has already been produced
marginal cost curve
profit is maximized by producing the quantity of output at which the marginal revenue of the last unit produced is equal to its marginal
Optimal output rule
