Chapter 12: The Firm and Market Structures Flashcards
Average revenue (AR)
Total revenue divided by quantity sold.
Shutdown point
The point at which average revenue is equal to the firm’s average variable cost.
Breakeven point
The point at which average revenue is equal to the firm’s average total cost.
Short-run average total cost
The curve describing average total cost when some costs are considered fixed.
Long-run average total cost
The curve describing average total cost when no costs are considered fixed.
Economies of scale
A decline in costs per unit as output grows, generally resulting from having fixed costs in the cost structure that are spread over more units of output.
Diseconomies of scale
Increase in cost per unit resulting from increased production.
Increasing returns to scale
When a production process leads to increases in output that are proportionately larger than the increase in inputs.
Decreasing returns to scale
When a production process leads to increases in output that are proportionately smaller than the increase in inputs.
Minimum efficient scale
The smallest output that a firm can produce such that its long-run average total cost is minimized.
Perfect competition
A market structure in which the individual firm has virtually no impact on market price, because it is assumed to be a very small seller among a very large number of firms selling essentially identical products.
Monopolistic competition
Highly competitive form of imperfect competition; the competitive characteristic is a notably large number of firms, while the monopoly aspect is the result of product differentiation.
Oligopoly
Market structure with a relatively small number of firms supplying the market.
Monopoly
In pure _____ markets, there are no substitutes for the given product or service. There is a single seller, which exercises considerable power over pricing and output decisions.
Price takers
Producers that must accept whatever price the market dictates.
