Dynamics of markets: relationship between markets

Question 1

what is a market

Answer 1

can be identified as buyers/sellers who influence the price of a good/service

Question 2

marginal cost (definition and formula)

Answer 2

amount by which the total cost increase when one extra unit of a product is produced
total cost (TR)/output(Q)=MC

Question 3

marginal revenue (definition and formula)

Answer 3

refers to the extra amount of income earned when an additional unit of a product is sold
TR/Q=MR

Question 4

average cost

Answer 4

fixed cost + variable cost = total cost
total cost/total output =AC
also called unit cost

Question 5

Average revenue (definition and formula)

Answer 5

average rev refers to the amount the enterprise earns for every unit sold
TR/Q=AR

Question 6

why does TR/Q=AR

Answer 6

cause TR=PQ
it follows that AR=PQ/Q
therefore AR=price

Question 7

average variable cost

Answer 7

variable cost divided by number of units produced

Question 8

price

Answer 8

a value that will purchase a definite quantity,weight, or other measure pf a good or service

Question 9

quantity

Answer 9

the extent, size, or sum of countable or measurable discrete events, objects, or phenomenon as a numerical value

Question 10

perfect competition

Answer 10

market structure with a large number of participants who are all price takers, there are no barriers to entry or exit barriers in the long run, and all info is available to both buyers and sellers and a product is sol

Question 11

egs of perfect competition

Answer 11

stock exchange
foreign currency market
central grain market
market for agricultural produce

Question 12

the point where the demand and supply curve meet is known as the..

Answer 12

market price

Question 13

individual businesses are known as

Answer 13

price takers

Question 14

the economic cost of production equals what

Answer 14

opportunity cost=explicit cost + implicit cost

Question 15

explicit cost

Answer 15

the actual expenditure of a business on the purchase or hire of the inputs required for the production process.

Question 16

egs of explici costs

Answer 16

wages
interest on borrowed capital
water
electrictiy

Question 17

implicit costs

Answer 17

the value of inputs that are owned by the entrepreneur and used in the production process

Question 18

egs of implicit costs

Answer 18

forfeited rent that could have been earned if the owner used his own building

forfeited interest earned if the owner invested his/her money

forfeited salary earned if the owner had worked elsewhere

Question 19

LEARN THE TABLE ON MARKET STRUCTURES

Answer 19

LEARN IT BUD

Question 20

normal profit

Answer 20

normal profit is the min earnings required to prevent the entrepreneur from closing the business

Question 21

economic profit

Answer 21

profit made in addition to normal profit

Question 22

what does economic profit equal

Answer 22

the difference between total revenue and total costs

Question 23

what does average variable cost (AVC) consist of

Answer 23

consists of per unit value

Question 24

what determines how much a business would produce at each price

Answer 24

the different market prices

Question 25

what does the production determine

Answer 25

the supply curve

Question 26

how is the market supply determined (with regard to the graphs)

Answer 26

the supply curves of all the businesses are added horizontally

Question 27

in the short term, what is the supply curve also called

Answer 27

the market supply curve

Question 28

what does the demand curve look like in a perfect market

Answer 28

always a perfectly horizontal demand curve

Question 29

what determines the market price

Answer 29

the industry

Question 30

why are individual businesses price takers

Answer 30

they can increase or decrease output in order to maximize profit

Question 31

where is profit maximized

Answer 31

where SMC=MR

Question 32

what determines the location and form of the supply curve

Answer 32

tech and the price of factors of production

Question 33

when is the industry in equilibrium

Answer 33

at a price that clears the market

Question 34

what is the result of economic profit

Answer 34

more businesses being attracted to the industry

Question 35

what are the 2 things that can change in the long run

Answer 35

new businesses can enter or leave the market businesses can adjust their production capacity

Question 36

what does the adjustment process do when the market price is below the minimum point of the long-term average cost curve

Answer 36

the adjustment curve works the other way around

Question 37

what happens to price in the long term

Answer 37

under perfect competition the price of a product in the long-term will settle at a level that corresponds to the lowest point of the LAC curve

Question 38

when will there be no further entry or exit of businesses

Answer 38

once long-term equilibrium has been achieved and provided that there are no changes in the tech or factors of production