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Flashcards in FINAL EXAM! Deck (28):
1

3 types of firms

proprietorship, partnership, corporation

2

types of debts

bank loans, bonds

3

equity

shares of the company of the owner

4

explicit vs implicit costs

explicit- cash costs, implicit- non-cash costs

5

sunk costs

costs that cannot be recovered

6

Accounting profits

Revenue- explicit costs

7

Economic profits

revenue- explicit + implicit costs

8

normal profits

profit needed for firm to stay in the industry

9

TP MP AP

TP=Q
MP= the increase in output after an additional input (change in TP/ Change in input variable)
AP= TP/Q

10

AT

typical cost of one unit of production

11

Marginal Cost

change in total cost of production after one additional input (Change in TC/ change in quantity)

12

perfect competition characteristics

* Many buyers and sellers
* Goods provided by different sellers are the same
* Free exist and entry
* Price takers
* Only price competition

13

monopoly characteristics

* one firm
* unique product
* price setter
* barriers to entry
* goodwill

14

covert vs overt collusion

covert- open
overt- closed

15

monopolistic competition characteristics

* many sellers
* product differentiation
* free entry/exist

16

options with losses

shutdown,
exist,
cut costs,
advertise,
improve quality/service,
price discrimination

17

Oligopoly characteristics

* at least 2 dominant firms
* a standardized or differentiated product
* price maker
* barriers to entry
* non-price competition

18

quantity leadership

Stackleberg

19

simultaneous quantity setting

Cournet

20

simultaneous price setting

Bertnard

21

game theory

study of how people behave in strategic situations

22

Dominant strategy

the best move to make despite what the other person does

23

Nash Equilibrium

when no participant can change his strategy to get a better outcome if the other Participant’s strategy stays constant

24

internalizing externalities

altering incentives so that firms take into account externalities i.e taxes

25

moral hazard

the tendency of a person who is not monitored to take part in dishonest behaviour

26

adverse selection

when the seller knows more about the good than the buyer, and the unknown attributes of the good become undesirable for of the buyer who doesn’t know about them

27

signaling

one of the ways markets deal with adverse selection, an informed party makes information known to an otherwise ignorant party i.e advertising and education

28

Screening

action taken by an uninformed party to force an informed party to reveal information i.e when buying a car, asking a mechanic to look over it.