Term
| Accounting profit does what? |
|
Definition
|
|
Term
| Economic profit does what? |
|
Definition
|
|
Term
|
Definition
| Costs involving the running of a business - purchases, rent, etc |
|
|
Term
|
Definition
| The opportunity cost of the best forgone opportunity. (Here, the owner has given up a job paying $45,000, and an annual return of $5,000 in interest ($50,000 total implicit costs)) |
|
|
Term
| What is accounting profit? = |
|
Definition
| Total revenue - explicit costs |
|
|
Term
|
Definition
| [Total revenue (PxQ) - total cost ([AVC+AFC]xQ)] |
|
|
Term
| What is economic profit? = |
|
Definition
| Accounting profit - implicit costs OR total revenue - explicit costs - implicit costs |
|
|
Term
| Variable costs increase as ___ |
|
Definition
| quantity produced increases |
|
|
Term
| Fixed costs are costs that ___ |
|
Definition
| are included even if there is no output, they do not change with output |
|
|
Term
| Diminishing marginal returns (to cost) can be seen in ___ |
|
Definition
| variable costs because of their increasingly steeper cost curve slope |
|
|
Term
| In the LONG RUN all inputs are ___ |
|
Definition
|
|
Term
|
Definition
| Fixed cost/quantity OR ATC - AVC |
|
|
Term
|
Definition
| Total Variable cost/quantity OR ATC - AFC |
|
|
Term
|
Definition
| change in total cost divided by change in quantity |
|
|
Term
|
Definition
| Total cost/quantity OR AVC + AFC |
|
|
Term
| Economies of scale is ___ |
|
Definition
| also known as increasing returns to scale, 50% increase in input means >50% increase in output |
|
|
Term
| Diseconomies of scale is ___ |
|
Definition
| also known as decreasing returns to scale, a 50% increase in input means <50% increase in output |
|
|
Term
| Marginal product of labor is ___ |
|
Definition
| the change in output that results from employing an added unit of labor. |
|
|
Term
| Diminishing marginal returns (to labor) can be seen in ___ |
|
Definition
| production function graphs because of the opposite slope it produces, (opposite to variable costs slope) |
|
|
Term
| In a graph, which is above the other? ATC or AVC? |
|
Definition
| ATC (MC cutting through both at their lowest) |
|
|
Term
| In the short run, perfectly (or purely) competitive firms will maximize their profit by producing ___ |
|
Definition
| The quantity where price = marginal cost AND the quantity where marginal revenue(MR)= marginal cost(MC) |
|
|
Term
| If a market exceeds Average Cost, profit will be? (+/-) |
|
Definition
|
|
Term
|
Definition
| costs that were incurred in the past and cannot be recovered. (Since the company is entering the fourth year of this project, the total sunk cost is calculated by adding up all costs in year one through year three.) |
|
|
Term
| Total future costs are __ |
|
Definition
| expected costs in a set number of years(time) added up (since company is entering 4th year, it its 4th-6th year costs added up) |
|
|
Term
| Shutdown price is when the ___ meets the ___ on a graph |
|
Definition
| AVC meets the MC, (MR is below AVC at profit-maximizing point) |
|
|
Term
| To earn positive economic profits, the price of the good must be above the price of where ___ meets ___ on a graph |
|
Definition
|
|
Term
| If a firm shuts down in the short run, the profit is [Revenue - cost] at __ quantity |
|
Definition
|
|
Term
| If a firm continues to operate in the short run to minimize losses, it will be where [revenue - cost] will be at its ____ |
|
Definition
|
|
Term
| If a firm is trying to minimize losses in a struggling business it is better for them to operate in ____ and exit in ____ |
|
Definition
| the shortrun /// exit in the longrun |
|
|
Term
| The long run supply curve on a graph is always more ____ than the short run supply curve on a graph |
|
Definition
| flatter // more elastic // can be flat meaning it is a constant cost industry |
|
|
Term
|
Definition
|
|
Term
| There is NO profit being made when price is at where ___ meets ___ on a graph |
|
Definition
|
|
Term
| For firms in perfectly (purely) competitive markets, long run economic profits are ___ |
|
Definition
| Zero (doesn't mean they aren't earning money), firms will exit if less than this and enter if higher than this |
|
|
Term
| In the long run, profits are zero so this happens when price is equal to the minimum ___ (on a graph as well) |
|
Definition
|
|
Term
|
Definition
|
|
Term
|
Definition
| is equal to the CHANGE in total revenue when the quantity sold increases by one |
|
|
Term
| ***price is always higher than ___ |
|
Definition
|
|
Term
| Firms will exit if ___ is less than ___ |
|
Definition
|
|
Term
| Firms will enter if ___ is greater than ___ |
|
Definition
|
|
Term
| Monopolists (looks for "only" in questions) will produce at __ meets __ but charge the ____ price possible |
|
Definition
| MC meets MR // highest price |
|
|
Term
| Example of barriers to entry ____ (3) |
|
Definition
| Patents, Exclusive ownership of resource, Economies of scale (Being able to produce at a lower average cost than others) |
|
|
Term
| In a perfectly (or purely) competitive firm, what price should they charge? = |
|
Definition
| Total revenue / quanity (table) MR=MC and above ATC (graph) |
|
|
Term
| Characteristics of Monopolies ___ (3) |
|
Definition
| Price is higher than other market structures, Firms can earn positive economic profit in the longrun, and there are significant barriers to entry |
|
|
Term
| Characteristic of perfect (pure) competitive market ___ (2) |
|
Definition
| efficient quantity is produced, and firms have no market power |
|
|
Term
| Price discrimination occurs when ___ |
|
Definition
| firms charge different consumers different prices for the same good. This is legal and happens frequently under the right circumstances |
|
|
Term
| Perfect price discrimination occurs when ___ |
|
Definition
| firms not only charge different consumers different prices, but also charge each person the maximum that they would be willing to pay for a good. This is rare because firms typically don't have perfect information about how much each person is willing to pay |
|
|
Term
| From most profit to lowest, a monopolist will do these steps ____ (4) |
|
Definition
| The firm has ability to perfectly price discriminate -> the firm can charge different prices to different consumers -> The firm charges consumers all the same price -> the firm must charge a price that is equivalent to its marginal cost |
|
|
Term
| Antitrust laws in monopolies are MAINLY used to ___ |
|
Definition
| Antitrust laws are used to promote competition (not reduce competition) by determining whether or not a particular merger would be significantly detrimental to competition |
|
|
Term
| Marginal Cost (MC) pricing in monopolies are when ___ |
|
Definition
| regulating agencies force the firm to price at it's Marginal cost (where MC meets D), BUT will not always result in a profit loss for the firm |
|
|
Term
| Antitrust laws in monopolies CAN ALSO (beneficial) be used to ___ |
|
Definition
| create monopolistic synergy, merging firms to reduce Average cost of production |
|
|
Term
| A price taker is a ____ while a price maker is a ___ |
|
Definition
| competitive firm // monopoly |
|
|
Term
| Coupons are an example of ___ |
|
Definition
| price discrimination because it offers a certain group of people (those willing to collect coupons are usually lower income) a lower price on certain goods in order make sales and therefor maximize profit for the firm. |
|
|
Term
|
Definition
|
|
Term
|
Definition
|
|
