35 Cards in this Set
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Competitive Market
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a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker
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Average Revenue
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total revenue divided by the quantity sold
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Marginal Revenue
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the change in total revenue from an additional unit sold
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Sunk Cost
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a cost that has already been committed and cannot be recovered
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Monopoly
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a firm that is the sole seller of a product without close substitutes
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Natural Monopoly
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a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms
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Price Discrimination
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the business practice of selling the same good at different prices to different customers
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Oligopoly
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a market structure in which only a few sellers offer similar or identical products
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Monopolistic Competition
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a market structure in which many firms sell products that are similar but not identical
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Monopolistic Competition Attributes
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-MANY SELLERS: there are many firms competing for the same group of customers
-PRODUCT DIFFERENTIATION: each firm produces a product that is at least slightly different than those of other firms. Thus, rather than being a price taker, each firm faces a downward-slopping demand curve
-FR…
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Game Theory
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the study of how people behave in strategic situations
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Collusion
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an agreement among firms in a market about quantities to produce or prices to charge
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Cartel
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group of firms acting in unison
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Nash Equilibrium
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a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen
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Prisoners's Dilemma
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particular "game" between two captured prisoners that illustrates why cooperation is difficult to maintain even when it is mutually beneficial
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Dominant Strategy
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a strategy that is the best for a player in a game regardless of the strategies chosen by the other players
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Total Revenue
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the amount a firm receives for the sale of its output
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Total Cost
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the market value of the inputs a firm uses in production
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Profit
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total revenue minus total cost
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Explicit Costs
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input costs that require an outlay of money by the firm
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Implicit Costs
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input costs that do not require an outlay of money by the firm (total cost of business is the sum of Explicit and Implicit Costs)
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Economic Profit
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total revenue minus total cost, including both explicit and implicit costs
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Accounting Profit
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total revenue minus explicit costs
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Production Function
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the relationship between quantity of inputs used to make a good and the quantity of output of that good
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Marginal Product
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the increase in output that arises from an additional unit of input
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Diminishing Marginal Product
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the property whereby the marginal product of an input declines as the quantity of the input increases
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Fixed Costs
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costs that do not vary with the quantity of output produced
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Variable Costs
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costs that vary with the quantity of output produced
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Average Total Cost
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total cost divided by the quantity of output
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Average Fixed Cost
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fixed cost divided by the quantity of output
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Average Variable Cost
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variable cost divided by the quantity of output
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Marginal Cost
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the increase in total cost that arises from an extra unit of production
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Efficient Scale
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the quantity of output that minimizes average total cost
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Economies of Scale
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the property whereby long-run average total costs falls as the quantity of output increases
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Constant Returns to Scale
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the property whereby long-run average total cost stays the same as the quantity of output changes
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ECO 202:Test 3