Graphing the Firm
The shape of the Total Product curve before diminishing marginal returns set in.
What is Increasing at an Increasing Rate?
A government-issued right that gives an inventor the exclusive right to produce a product for a specific period.
What is a Patent?
A market is allocatively efficient when it produces at a quantity where Price equals this.
What is Marginal Cost (MC)?
This law explains why the Marginal Product of an additional worker eventually decreases.
What is the Law of Diminishing Marginal Returns?
This classic game theory scenario illustrates why two firms might fail to cooperate even when it is in their best interest to do so.
What is the Prisoners' Dilemma?
On a standard cost graph, the vertical distance between the ATC and AVC curves represents this value
What is Average Fixed Cost (AFC)?
A barrier to entry where a firm controls a significant portion of the raw materials needed for production.
What is Ownership of Essential Resources?
A market is productively efficient when it produces at a quantity where Price equals this.
What is Minimum Average Total Cost (ATC)?
If a firm is currently producing where MR > MC, it should do this to its output level to increase profit.
What is Increase Output?
In a payoff matrix, these are the two variables usually listed on the horizontal and vertical axes representing the firms' choices.
What are Strategies (or Actions)?
This shaded rectangular area on the graph represents what?
What is Economic Profit?
These are the legal or technical obstacles that prevent new firms from entering an industry.
What are Barriers to Entry?
Monopolists are socially inefficient because they produce a quantity that is too low, meaning this is not maximized.
What is Total Economic Surplus (or Social Welfare)?
Even if a firm is making an economic loss, it should stay open in the short run as long as it can cover its total [blank] costs.
What are Variable Costs?
Cartels are notoriously difficult to maintain because each individual member has a strong incentive to do this.
What is Cheat (or increase output/lower price)?
The Marginal Cost curve is the mirror image of this production-based curve.
What is the Marginal Product (MP) curve?
In an oligopoly, this type of barrier involves the high costs associated with starting a business, such as buying massive machinery.
What are High Start-up Costs (or Economies of Scale)?
Under perfect price discrimination, this specific group's surplus is reduced to zero.
Who are the Consumers?
The name of the time period in which at least one resource or input is fixed.
What is the Short Run?
When firms in an oligopoly informally follow the pricing lead of the largest firm in the industry.
What is Price Leadership?
This "U-shaped" curve is composed of the minimum points of several short-run average total cost curves.
What is the Long-Run Average Total Cost (LRATC) curve?
This specific barrier occurs when a product becomes more valuable as more people use it, like a social media platform.
What are Network Externalities (or Network Effects)?
When a government regulates a natural monopoly to be allocatively efficient, it sets the price equal to MC, which is known as this type of pricing.
What is Socially Optimal Pricing?
If a firm's total revenue is $1,000 and its total variable cost is $1,200, the firm should do this immediately.
What is Shut Down?
This term describes a game where the total gains and losses of the players add up to zero.
What is a Zero-Sum Game?