Micro 7 Flashcards
When does profit maximisation occur ?
MC=MR
Occurs when the difference between tidal revenue and total cost is greatest .
When does productive efficiency occur ?
MC = AC
Achieved when production us achieved at lowest cost
When does allocative frequency occur ?
MC=MR
Occurs when scarce resources are used to produce a bundle of goods which satisfies consumer preferences and maximises welfare.
When does normal profit occur ?
AC=AR
The minimum level of profit needed to lee[ a firm using its resources in a market in the long term.
What is a monopoly ?
any business with a 25%+ share of the market share. more market power, less efficiency . price maker
What is a Oligopoly?
more market power, less efficiency .
What is monopolistic competition ?
more contestale , lower barriers to entry
What is perfect competition ?
equal market share . lower barriers to entry. More contestable. Price taker .
What is the law of diminishing returns ?
if one variable factor of production is increased but all other factors stay fixed , eventually the marginal return from the variable factor will begin to decrease.
What is total revenue ?
total amount of money received from selling a product/service over a period of time.
What is average revenue ?
revenue per unit sold.
What is marginal revenue ?
extra revenue from selling one more unit .
What is normal profit ?
is when Total revenue = total costs (TC) so the firm makes an economic profit of £0 , normal profit is the minimum level of profit needed to keep resources in their current use in the long run .
What is supernormal/ abnormal profit
Is when TR > TC so the firm makes an economic profit above the value of TC. This can act as an incentive for other forms to try and enter the market.
When is profit maximised ?
when MC ( marginal costs ) = MR ( marginal revenue )
