year 2 mirco

Question 1

Normal profit

Answer 1

the return needed for a firm to stay in the market

Question 2

Supernormal profit

Answer 2

The profit above normal profit

Question 3

profit maximisation

Answer 3

MC=MR

Question 4

Sales revenue maximisation

Answer 4

MR=0

Question 5

Sales volume maximisation

Answer 5

AC=AR

Question 6

Variable factors of production

Answer 6

FOPs that can be put into overtime

Question 7

sunk costs

Answer 7

costs that will not be regained when a firm leaves the market

Question 8

Minimum efficient scale

Answer 8

the level of output at which LRAC stops falling

Question 9

internal economies of scale

Answer 9

economies of scale which that arise from a firms expansion

Question 10

external economies of scale

Answer 10

Economies of scale which arise from an expansion in the industry

Question 11

Technical efficiency

Answer 11

the maximum output from a set of inputs

Question 12

cost efficiency

Answer 12

the appropriate combination of inputs

Question 13

accounting profit

Answer 13

TR-TC

Question 14

economic cost

Answer 14

total cost + opportunity cost

Question 15

market structure

Answer 15

the market environment in which firms operate

Question 16

prefect competition

Answer 16

a form of market structure which produces allocative and productive efficiency in the long run

Question 17

price taker

Answer 17

a firm that must accept whatever price is set at the market

Question 18

allocative efficiency

Answer 18

Achieved when consumer satisfaction is maximised MC=MB or S=D

Question 19

productive efficiency

Answer 19

when a firm achives minimum average total cost

Question 20

homogeneous product

Answer 20

a product that is identical to others on the market

Question 21

perfect knowledge

Answer 21

buyers and firms know prices from other firms, and no firm has superior production technique

Question 22

monopolistic competition

Answer 22

a market that shares some characteristics of a monopoly and some of perfect comp

Question 23

product differentiation

Answer 23

a strategy firms use to compete

Question 24

n-firm concentration ratio

Answer 24

the measure of the market share of the largest n firms in a market

Question 25

oligopoly

Answer 25

a market with few dominant sellers

Question 26

non price competition

Answer 26

when firms compete by advertising

Question 27

cartel

Answer 27

an agreement between firms on price or output

Question 28

tacit collusion

Answer 28

where firms avoid competing on price without explicitly saying they are going to do so

Question 29

strategic alliance

Answer 29

a long term cooperative arrangement between firms such as bulk buying

Question 30

price leadership

Answer 30

a dominant producer sets prices and competitors follow

Question 31

barometric price leadership

Answer 31

a firms tries to increase a price top see how the market reacts

Question 32

predatory pricing

Answer 32

when a firm sets prices below variable costs to force rivals out of the market

Question 33

contestable market

Answer 33

a market in which the existing firm makes only normal profit

Question 34

hit and run entry

Answer 34

where a firm enters a market to take short run SNP knowing it can exist without incurring costs

Question 35

sub market

Answer 35

A part of a larger market with its own unique characteristics

Question 36

derived demand

Answer 36

when the demand for a product is derived not from the product itself but from the goods or services it provides

Question 37

marginal physical product of labour

Answer 37

the additional quantity of output produced by an additional unit of labour input

Question 38

marginal revenue product of labour

Answer 38

the additional revenue received by a firm as it increases output from each extra unit of input

Question 39

marginal revenue product theory

Answer 39

A theory that argues that the demand for labour depends upon balancing the marginal revenue for employing a worker against its marginal cost

Question 40

labour productivity

Answer 40

a measure of output per hour worked

Question 41

unit labour cost

Answer 41

the average cost of labour per unit of output

Question 42

non-pecuniary benefits

Answer 42

benefits offered to workers that are not financial in nature

Question 43

income effect

Answer 43

the change in demand for a good or service caused by a change in a consumers purchasing power

Question 44

substitution effect

Answer 44

as prices rise consumers will replace more expensive products with cheaper ones

Question 45

transfer earnings

Answer 45

the minimum payment required to keep a factor of production in its present use

Question 46

economic rent

Answer 46

a payment received by a factor of production over and above what is required to keep it in its current use

Question 47

wage elasticity supply of labour

Answer 47

a measure of the sensitivity of the supply of labour against wages