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Basic Concepts
Costs
Factor Market
Market Structures
Miscellaneous
100

MR = MC

What is profit maximizing rule for all firms?

100
The extra cost of producing one more unit of output.
What is marginal cost?
100
The change in total revenue resulting from the use of each additional unit of a resource.
What is marginal revenue product?
100
Large number of firms, standardized product, price takers, free entry and exit.
What is characteristics of purely competitive markets?
100
A strategy in which one firm's product is distinguished from competing products by means of its design, related services, quality, location, or other attributes.
What is product differentiation?
200

P = MC

What is allocative efficiency?

200
The monetary income a firm sacrifices when it uses a resource it owns rather than supplying the resource in the market.
What is implicit cost?
200
To maximize profit a firm should hire additional units of a resource as long as each successive unit adds more to the firm's total revenue than it adds to total cost.
What is the rule for employing resources: MRP = MRC?
200

In the long run, firms will be at which economic profit?

What is zero economic profit?

200
A good or service that is characterized by non-rivalry and non excludability.
What is a public good?
300
To maximize satisfaction, the consumer should allocate his/her money income, so that the last dollar spent on each product yields the same amount of of extra utility.
What is the utility maximizing rule (MUa/Pa = MUb/Pb)
300
The amount of other products that must be given forgone or sacrificed to produce a unit of a product.
What is opportunity cost?
300

If a factor market has a side by side graph with a perfect competition market, the perfect competition product market graph will show that the worker is a....

What is price taker?

300
Economies of scale, patents, control of key resources, non-price competition.
What is barriers to entry?
300
The inability of a market to bring about the allocation of resources that best satisfies the wants of society.
What is a market failure?
400
Reductions in combined consumer and producer surplus caused by an underallocation or overallocation of resources to the production of a good or service.
What is dead weight loss (efficiency loss)
400
Any cost that in total does not change when the firm changes its output.
What is fixed costs?
400

The quantity of each resource a firm must employ to maximize its profit or minimize its loss

What is profit maximizing combination of resources

400

The act of firms secretly (or sometimes openly) cooperating to manipulate the market. Instead of competing against each other, they work together to...

What is collude?

400
A curve showing the distribution of income in an economy.
What is the Lorenz curve?
500
The price paid for the use of land, and other resources which are fixed in supply.
What is economic rent?
500
A firm's monetary payments to those who supply labor services, fuel, transportation services, etc.
What is explicit costs?
500

Changes in product demand and changes in productivity.

What is determinants of demand?

500
The selling of a product to different buyers at different prices when the price differences are not justified by differences in cost.
What is price discrimination?
500
The principle that as successive increments of a variable resource are added to a fixed resource, the marginal product of the variable resource will eventually decrease.
What is law of diminishing returns?