Micro Economics - Test 2 Flashcards

520565369	Perfect competition	The decisions of individual buyers and sellers have no effect on prices. The firm is a price taker. An industry where many small firms produce a nearly identical product.
520565370	Perfectly elastic	 The demand curve for a perfectly competitive market is a horizontal line.  A 1% change in price leads to a greater than 1% change in demand
520565371	Unitary Elastic	 A price change leads to no change in the revenue for the product.
520565372	Perfectly Inelastic	 When the price changes and there is no change in demand or revenue.
520565373	Price Elasticity Of Demand	Responsiveness of demand to a change in a product's price.
520565374	Elastic Demand	 A 1% change in price leads to a greater than 1% change in demand. In elastic demand, when price is reduced, total revenues rise. The larger the number of substitutes, the greater the elasticity.
520565375	Inelastic Demand	 A 1% change in price leads to a less than 1% change in demand.
520565376	Total Cost	Fixed cost plus variable cost
520565377	Fixed Costs	 _____ ____ are costs that must be paid whether or not a product is produced; loans, capital equipment, utilities, salaries of senior management and staff. Also called operating costs.  ____ _______ do not vary with output.
520565378	Variable Cost	 __________ ______ vary with changes in inputs. In the long run all costs are variable costs.  70% of ____ ____are labor costs.
520565379	Total Revenue	Price times quantitiy.
520565380	Marginal Product	Producing one more unit. The change in total production associated with producing one more unit.
520565381	Marginal Cost	 The increase in total costs from producing one more unit.  The cost of producing one more unit,
520565382	Profits	 _______are the difference between total cost and price. They are rewards for innovation and risk taking by entrepreneurs.  _____ are a signal to producers that they are meeting consumers' needs.
520565383	Short-Run Breakeven (Tr=Tc)	 The point at which a firm earns normal or accounting profits.  When total revenues equal total costs there are accounting profits only
520565384	Economic Profits	 MR = MC: Marginal revenue at its highest, marginal cost at its lowest. Also, TR minus implicit/explicit costs.  A profit in excess of accounting profits is called economic or pure profits.  ____ ____are above accounting profits and include accounting profits.  It is possible for a single firm to make economic profits while the industry cannot.  If MR and MC come together above the average total cost curve, pure economic profits are maximized.
520565385	Profit Maximization -- (MR=MC)	A ____ ____ing firm will choose the technology that minimizes cost. In a competitive market, all firms seek to maximize profits.
520565386	Least Cost Combination of Resources	 All firms seek to maximize profits by using the combination of labor and technology that minimizes costs.
520565387	Revenue Maximization (TR>TC)	 ____ ____occurs at the long run, second breakeven; accounting profits occur both at the short-run breakeven and the long run breakeven.
520565388	Marginal Revenue	 Increase in Total Revenues associated with adding one more unit of a product.
520565389	Functions of Price	 Price organizes the market, rations scarce goods, steers resources in to their most efficient or profitable use.
520565390	Economies of Scale	Implies that as one unit of input is added, output increased by more than one unit. Increased production leads to lower average costs per unit. Economies of scale are a result of increased specialization.
520565391	Dis-Economies of Scale	 __________ of scale are a result of problems with coordination and communication in large firms and poor management. Increase in inputs leads to higher per unit cost. One unit in, less than one unit out.
520565392	Constant Return To Scale	 One unit in, one unit out. If input doubles, output doubles.
520565393	Natural Monopoly	 A monopoly that can take advantage of decreasing average costs. Where a single firm can produce all of the industry's output at a lower per-unit cost than other firms.
520565394	Government Barriers and Monopoly	In order for a monopoly to exist, there must be barriers.
520565395	Patents, Copyrights And Trademarks	 The barriers that prevent competition and protect a monopoly. They are Government sanctioned monopolies.
520565396	Monopoly Demand Curve and Profits	 The ____ ____ ______is the market curve. Monopolies do not always earn a profit. Monopolies seek to maximize profits, not meet the full demand of consumers.
520565397	Price Searcher-Trial and Error	 Monopoly firms use trial and error to find the price that maximizes profit. They are____ ____
520565398	Price Taker	 Firms in a perfectly competitive market (perfect competition) are ____ ____.
520565399	Monopolistic Competition	 Each firm holds a relatively small market share. In a monopolistic competition there tends to be zero economic profits. They are price takers.  A market where there are a large number of firms that produce similar but not identical products.
520565400	Kinked Demand Curve	 An analysis used to explain why price changes are infrequent in an oligopoly.  In ____ ____ theory, prices tend to be inflexible.
520565401	Cartel/Collusion	 A ______ is an international association of producers who agree to set common prices and restrict output. .  _________ is national. Collusion among oligopolists is difficult because of demand and cost differences.
520565402	Oligopoly/Oligopolis	 An ________ is where 4 to 8 firms dominate the market.  An _________ assumes competitors will not follow suit when he raises prices but will when he lowers prices.
520565403	Product Differentiation	Distinguishing a product by name brand, color, or attributes
520565404	Price Discrimination	 Selling a product at more than one price where cost is not a consideration.  Student discounts; senior citizen discounts, etc.  Selling a product at more than one price where cost is not a consideration.
520565405	Game Theory	 A method of describing possible outcomes in various business situations. This is called: analysis of oligopoly behavior.
520565406	Horizontal Merger	 A merger involving companies that sell similar products..
520565409	Pure Rent	Payment for any resource with a limited supply.
520565410	Minimum Efficient Scale	 The lowest level at which a firm can minimize long range average costs
520565412	Utility	_______ refers to the usefulness or satisfaction received from using a product. The satisfaction a product provides.
520565413	Marginal Utility	 The utility gained from consuming one more unit.
520565414	Total Utility	 ____ ____ is the increase in satisfaction a consumer realizes from consuming an additional unit of a product.
520565415	Price Floor	 Minimum price fixed by a firm or the government. A _______ _______ leads to a surplus. A price floor is above the market price. An example is farm subsidies.
520565416	Price Ceiling	 The ______ ______ is below market prices and is established by the government. It is the maximum legal price a seller can charge. It leads to a shortage. An example is wage and price controls.
520565417	Diminishing Marginal Returns	 Implies increasing marginal cost. Marginal returns and marginal products are expressions of the same thing.
520565418	Implicit Costs	_________ ________ are payments made to the owners of the firm.
520565419	Explicit Costs	________ _________ are payments made to non-owners of the firm.
520565420	Productivity	 An increase in capital investment increases the output per unit of input - the _______ of labor. A ¼% increase in investment will increase productivity by 1%  The average product produced is a measure of output per worker
520565421	Production Costs	 A decrease in the cost of the inputs (factors) leads to lower per unit production costs. A shift in consumer tastes and preferences will cause total production to change.
520565422	Average Total Cost	 Total fixed costs divided by quantity produced
520565423	Pareto Positive Superior Theorem	I've got something you want. You've got something I want. Let's make a deal.
520565424	Interest And Dividends	 ______ is the price paid for the use of money. _______ are income earned from investments. ____ and ____are the two forms of capital.
520565425	Purchasing Power	 A decline in prices, or price level, will increase the consumer's ____ ____.
520565426	Retained Earnings	 Corporate profits after taxes are divided into two categories, dividends and retained earnings. ____ ____ are used for internal financing.
520565427	Depreciation	 ________ is also called the consumption of fixed capital.
520565428	Derived Demands	 The demand for the inputs or factors of production.
520565429	Tariffs	 _______ are a tax on imported goods. They are an excise tax
524928642	Monopoly / Monopolist	The supplier of a good or service for which there is no close substitute. In a _______ prices tend to be inelastic. A _________ does not always earn a profit.
530121894	Substitution Effect	When the price of a product falls, people buy more of it.