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22 Cards in this Set
- Front
- Back
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Productive Efficiency
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Society cannot produce more of one product without producing less of another
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Average variable cost
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variable cost/quantity
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Marginal Revenue
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Amount revenue increases when output increases by one
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Fixed Cost
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Costs that must be paid even if quantity of output is zero
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Economic profit
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Total revenue - total opportunity cost = accounting profit - implicit cost
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Law of diminishing returns
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In the short run (when at least one input is fixed), MC eventually increases as Q increases
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In long run competitive equilibrium, economic profits are...
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ZERO
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Accounting profit
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Total revenue - direct cost
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Break even price
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Minimum of AC curve
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Marginal cost
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Amount cost increases when output increases by one
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Variable cost
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Total cost - fixed cost
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Opportunity cost
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What you lose by not doing next best alternative
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Glasnost
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openness
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Long Run
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Period in the future where all inputs are variable (no fixed cost)
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Exchange efficiency
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Achieved after all mutually advantageous trades have been done
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Perestroika
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Reform or restructuring
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Short run
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Time period in the near future, where at least one input is fixed
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Natural monopoly
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Long run average cost continues to decline as quantity produced increases
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To maximize profits, a monopoly should follow this rule:
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Marginal revenue equals marginal cost
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Shutdown Price
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Minimum of AVC curve
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When MC crosses AC, it is the ... of AC
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MINIMUM
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Average cost
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Total cost / Quantity
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