Marginal Analysis
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| know why economic costs include both explicit costs and implicit costs | show 🗑
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| show | The law of diminishing returns describes what happens2output as a fixed plant is used more intensively.As successive units of a variable resource like labor R added to a fixed plant, beyond some point the MP associated w/each add. unit of a rsrce.declines
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| differentiate among fixed costs, variable costs, total costs, average costs, and marginal costs | show 🗑
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| explain the conditions required for purely competitive markets | show 🗑
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| describe why firms in any structure use the MR = MC rule of profit maximization | show 🗑
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| law of diminishing marginal utility | show 🗑
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| utility | show 🗑
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| show | the total amount of satisfaction or pleasure a person derives from consuming some specific
quantity—for example, 10 units—of a good or service.
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| marginal utility | show 🗑
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| rational behavior | show 🗑
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| budget constraint | show 🗑
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| show | To maximize satisfaction, the consumer should allocate his or her money income so that the last dollar spent on each product yields the same amount of extra (marginal) utility.
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| consumer equilibrium | show 🗑
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| show | the impact that a change in the price of a product has on a consumer’s real income and consequently on the quantity demanded of that good.
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| show | the impact that a change in a product’s price has on its relative expensiveness and consequently on the quantity demanded.
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| show | branch of economics that combines economics, psychology,&neuroscience to understand those situations when actual choice behavior deviates from the predicted,which incorrectly concluded that people were always rational,deliberate, & unswayed by emotions
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| status quo | show 🗑
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| loss averse | show 🗑
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| show | how consumers plan for and deal with life’s ups and downs as well as why they often appear narrow-minded and fail to “see the big picture.”
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| show | Changes in people’s preferences that are caused by new information that alters the frame used to define whether situations are gains or losses
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| anchoring | show 🗑
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| show | describe this behavior, because it was as if people arbitrarily put certain options into totally separate “mental accounts” that they dealt with without any thought to options outside of those accounts.
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| show | which is the tendency that people have to put a higher valuation on anything that they currently possess (are endowed with) than on identical items that they do not own but might purchase.
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| show | the payment that must be made to obtain and retain the services of a resource. It is the income the firm must provide to resource suppliers to attract resources away from alternative uses.
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| explicit costs | show 🗑
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| implicit costs | show 🗑
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| show | Revenue - Explicit costs
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| normal profit | show 🗑
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| economic profit | show 🗑
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| show | Fixed plant period, In microeconomics, a period of time in which producers are able to change the quantities of some but not all of the resources they employ; a period in which some resources (usually plant) are fixed and some are variable.
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| long run | show 🗑
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| show | Total quantity or output of a particular good or service produced
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| marginal product (MP) | show 🗑
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| show | The total output produced per unit of a resource employed (total product divided by the quantity of that employed resource).
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| law of diminishing returns | show 🗑
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| show | Do not vary with changes in output
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| variable costs | show 🗑
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| total cost | show 🗑
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| average fixed cost (AFC) | show 🗑
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| average variable cost (AVC) | show 🗑
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| average total cost (ATC) | show 🗑
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| show | Additional cost of producing one more unit of output
MC = change in TC / Change in Q
change to total variable expense resulting from one more unit change to output.
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| economies of scale | show 🗑
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| diseconomies of scale | show 🗑
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| constant returns to scale | show 🗑
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| show | The lowest level of output at which a firm can minimize long-run average total cost
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| show | An industry in which economies of scale are so great that a single firm can produce the product at a lower average total cost than would be possible if more than one firm produced the product.
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| show | A market structure in which a very large#of firms sells a standardized product: -entry is very easy -individual seller has no control over the product price -there is no nonprice competition -market characterized by a very large # of buyers and sellers.
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| show | A market structure in which one firm sells a unique product
-entry is blocked
-single firm has considerable control over product price
-non price competition may or may not be found
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| monopolistic competition | show 🗑
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| show | A market structure in which a few firms sell either a standardized or differentiated product.
-entry is difficult
-the firm has limited control over product price because of mutual interdependence
-there is typically non price competition
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| imperfect competition | show 🗑
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| price taker | show 🗑
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| average revenue | show 🗑
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| show | The total number of dollars received by a firm (or firms) from the sale of a product; equal to the total expenditures for the product produced by the firm
-equal to the quantity sold (demanded) multiplied by the price at which it is sold.
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| show | Change in total revenue that results by selling one more unit
-In pure competitions MR and price are equal
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| show | An output at which a firm makes a normal profit TR=TC
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| MR = MC rule | show 🗑
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| short-run supply curve | show 🗑
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| show | Price, but not real output, changes when the demand curves shifts, vertical supply curve that implies fully flexible prices.
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| constant-cost industry | show 🗑
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| increasing-cost industry | show 🗑
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| show | Expansion through the entry of firms lowers the prices that firms in theindustry must pay for resources
-decreases their production costs.
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| productive efficiency | show 🗑
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| allocative efficiency | show 🗑
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| consumer surplus | show 🗑
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| producer surplus | show 🗑
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| creative destruction | show 🗑
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| pure monopoly | show 🗑
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| barriers to entry | show 🗑
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| show | The same-time derivation of utility from some product by a large number of consumers.
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| network effects | show 🗑
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| show | The production of output, whatever its level, at a higher average (and total) cost than is necessary for producing that level of output
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| show | The actions by persons, firms, or unions to gain special benefits from government at the taxpayers' or someone else's expense
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| price discrimination | show 🗑
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| show | The price of a product that results in the most efficient allocation of an economy's resources and that is equal to the marginal cost of the product
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| show | The price of a product that enables its producer to obtain a normal profit and that is equal to the average total cost of producing it.
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| show | Market structure
-Many firms sell differentiated product
-entry is relatively easy
-firm has some control over product price
-there is considerable non price competition
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| product differentiation | show 🗑
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| nonprice competition | show 🗑
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| four-firm concentration ratio | show 🗑
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| show | A measure of the concentration competitiveness of an industry calculated as the sum of the squared percentage market shares of the individual firms in the industry
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| excess capacity | show 🗑
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| oligopoly | show 🗑
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| show | Oligopoly in which firms produce a standardized product
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| show | Oligopoly in which firms produce a differentiated product
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| strategic behavior | show 🗑
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| show | Change in strategy of one firm will affect the sales and profits of another firm. Rivals will react to these changes
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| interindustry competition | show 🗑
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| import competition | show 🗑
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| game theory | show 🗑
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| show | Situation in which firms act together and in agreement to fix prices, divide a market, restricting competition
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| show | Demand curve for a non collusive oligopolist based on the assumption that rivals will match a price decrease and ignore a price increase
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| show | Successive and continued decreases in price charged by firms in an oligopolistic industry. Each firm lowers its price below rivals hoping to increase its sales and revenues at its rivals expense
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| cartel | show 🗑
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| show | Informal method that firms in an oligopoly may employ to set price of their product: one firm announces change in price other firms soon announce identical or similar changes
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