test#2 Flashcards
What is a fixed resource and a variable resource?
A fixed resource remains unchanged as output increases, and a variable resource changes in tandem with output. All resources are utilized as inputs in the production process
law of diminishing returns
law of diminishing returns, also referred to as the law of diminishing marginal returns, states that in a production process, as one input variable is increased, there will be a point at which the marginal per unit output will start to decrease, holding all other factors constant.
difference between short run and long run
In the short run, there are both fixed and variable costs.
In the long run, there are no fixed costs.
Efficient long run costs are sustained when the combination of outputs that a firm produces results in the desired quantity of the goods at the lowest possible cost.
Variable costs change with the output. Examples of variable costs include employee wages and costs of raw materials.
The short run costs increase or decrease based on variable cost as well as the rate of production. If a firm manages its short run costs well over time, it will be more likely to succeed in reaching the desired long run costs and goals
define the economies and diseconomies of scale
Diseconomies of scale is an economic concept referring to a situation in which economies of scale no longer function for a firm. Rather than experiencing continued decreasing costs per increase in output, firms see an increase in marginal cost when output is increased.
4 different market structures
Monopolistic competition, monopoly, oiligopoly, perfectly competative market
Large number of sellers and buyers producing a homogeneous good or service, easy entry
perfectly competative market
why is perfect comp price takers
s, meaning that they accept the market price as fixed
monopoly characteristics
Large number of buyers, one seller. Entry is blocked.
4 types of monopolies
natural: a market situation, such as a public utility, in which costs are minimized by having a single firm produce the product;
b. geographic: based on the absence of other sellers in a geographic area;
c. technological: based on ownership or control of a manufacturing method, process, or other scientific advance;
d. government: involving products that private industry cannot adequately provide
Is a monopoly allo efficient?
No it is not allocatively efficient because the monopolist’s price always exceeds its marginal cost.
are monopolies productively efficient
yes Their profits will be maximized when they adopt the lowest-cost production method. Hence, profit-maximizing monopolists’ will operate on their LRAC
lumpsum tax
A lump-sum tax is a tax that is a fixed amount, no matter the change in circumstance of the taxed entity. (A lump-sum subsidy or lump-sum redistribution is defined similarly.)
per unit tax
A per unit tax, or specific tax, is a tax that is defined as a fixed amount for each unit of a good or service sold, such as cents per kilogram. It is thus proportional to the particular quantity of a product sold, regardless of its price.
subsides
The subsidy is usually given to remove some type of burde
mono comp firm
may earn either profits or losses in the short run, but tend to earn zero economic profits in the long run
