Unit 3 Flashcards Preview

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Flashcards in Unit 3 Deck (35):
1

accounting profit

revenue - explicit cost

2

economic profic

revenue - economic cost

3

short run
(long run guidelines)

no change in capacity
1. total product
2.Marginal product (extra)
3.Avg. Product (per workers) = TP/#workers

4

law of diminishing marginal returns

labor added until pt where marginal product decreases, why demand curve goes down

5

fixed cost

short run

6

variablle cost

long run

7

total cost

fixed+variable, starts at FC in graph

8

average costs

AFC = TFC/C
AVC = TVC/Q
AVT = TC/Q

9

marginal cost

MC=TC/Q; intersects AVC and ATC at minimum

10

LRATC/planning curve

long run, multiple factories, connects short runs at tangent

11

market structure

perfect competition-monopolistic competition-oligopoly-pure monopoly

12

pure competition

1. large # producers
2. Standardized product
3. Price takers
4. Free entry/exit

13

MC=MR

max profit:
1. produce at last unit
2. prefer no shutdown
3. all structures
4. in PC, P=MR (break even pt)

14

pure monopoly

1. single seller
2. No close substitute
3. Price maker
4. Blocked entry
5. non-price competition

15

barriers to entry

1. economy to scale
2. legal barriers (patents, licences)
3. ownership of resources
4. price strategy (monopolist created monopoly)

16

economy to scale

produced at lowest possible cost, competition can't pay

17

pure monopoly assumptions

1. barrier to entry exists
2. no gov. regulations
3. Single price monopolists

18

pure monopoly misconceptions

1. want to charge highest price
2. total profit not per unit profit
3. profit is not guaranteed

19

price discrimination types

1. charge max their willing to pay
2. Different sets(# of items determines $)
3. Charging different prices to everyone

20

price discrimination requirements

1. monopoly power
2. market segregation
3.No resale

21

regulated monopoly

government sanctioned;
fair return where ATC=D
socially economic where MC=D

22

monopolistic competition

1. large # sellers (no collusion)
2. no interdependence
3. differentiated product
4. easy entry/exit
5. use of advertising

23

differentiated product

1. attributes
2. service (knowledge/reputation)
3. location
4. brand name
5. some control over price

24

long run

normal profit, break even

25

concentration ratio

output of top 4 firms;
>40% olgiopoly
<40% monopolisitc competition

26

herfindahl index

range 0 (pure comp. ) to 10,000(pure mono.)
(%a) squared + (%b) squared ...etc...

27

oligopoly

1. few large producers
2. homogenous or differentiated product
3. control over price, mutually interdependent,
4.entry barriers
5. mergers

28

oligopoly shortcomings

1. localized markets
2. interindustry competition
3. world trade
4. dominant firms

29

game theory

study strategic situations

30

payoff matrix

dominant vs dominated strategy, nash equillibrum

31

dominant strategy

best payoff for individual regardless

32

dominated strategy

whichever isn't dominant

33

nash equilibrium

both have same dominant strategy

34

economies of scale

downward, advantages of increase plant size
1. labor and managerial specialization
2. ability to purchase/effciently use goods

35

diseconomies

upward, if a firm is too large
1. caused by distant management, problems with communication/coordination