Last-Minute Final Exam Review

A collection of flashcards for studying key concepts and vocabulary related to different market structures, economic principles, and consumer behavior in preparation for the final exam.

Perfect Competition

A market structure characterized by many buyers and sellers, homogeneous products, and no barriers to entry.

Price Takers

Firms in perfect competition that accept the market price without influence.

Short-run Decisions

Choices that firms make to maximize profits based on current market conditions.

Long-run Decisions

Strategic choices made by firms about entering or exiting an industry.

Monopoly

A market structure with a single seller dominating the market and high barriers to entry.

Deadweight Loss (DWL)

Economically inefficient outcomes in monopolistic markets due to restricted output.

Natural Monopoly

A market where one firm can supply the entire market demand at a lower cost than multiple firms.

Government-created Monopoly

A monopoly established through legal protections such as patents and exclusive rights.

Diminishing Marginal Returns

Decreasing additional output gained from increasing one variable input, holding others constant.

Oligopoly

A market structure dominated by a few large firms with strategic interactions.

Dominant Strategy

The best choice for a firm regardless of the actions of other firms.

Nash Equilibrium

A situation in which no player can gain by changing their strategy while other players keep theirs unchanged.

Herfindahl-Hirschman Index (HHI)

A measure of market concentration calculated by the sum of the squares of market shares of all firms.

Fixed Costs (FC)

Costs that do not vary with the level of output, such as rent and salaries.

Variable Costs (VC)

Costs that change with the level of output, such as materials and labor.

Marginal Cost (MC)

The change in total cost from producing one additional unit.

Average Total Cost (ATC)

Total cost divided by the quantity of output.

Average Variable Cost (AVC)

Variable costs divided by the quantity of output.

Shutdown Rule

A firm should cease production in the short run if the price is less than average variable costs.

Consumer Theory

The study of how consumers allocate their income to maximize utility.

Total Utility

The overall satisfaction gained from consuming a good or service.

Marginal Utility

The additional satisfaction gained from consuming one more unit of a good.

Public Goods

Goods that are non-rival and non-excludable, such as national defense.

Negative Externalities

Costs imposed on third parties not involved in a transaction, leading to overproduction.

Explicit Costs

Direct monetary payments a firm makes for inputs and resources.

Implicit Costs

Opportunity costs associated with a firm's resources.

Economic Cost

The total cost of production, including both explicit and implicit costs.

Profit Maximization Rule

The principle that a firm maximizes profit by producing where marginal revenue equals marginal cost.

Game Theory

A theoretical framework for understanding strategic interactions among firms in oligopoly.

Cooperative Strategies

Strategies where firms work together to maximize joint profits, often contrary to competitive strategies.

Market Structure

The organizational and other characteristics of a market, including the number of firms and product differentiation.