Costs and Profit Maximization Under Competition

A set of vocabulary flashcards covering key concepts related to costs and profit maximization in economics.

Cost

The value of resources used to produce goods or services.

Profit Maximization

The process by which a firm determines the price and production level that returns the greatest profit.

Competition

The rivalry among sellers to attract customers while lowering costs.

Marginal Cost

The cost of producing one additional unit of a good or service.

Average Total Cost

Total cost divided by the quantity of output produced.

Economies of Scale

Cost advantages reaped by companies when production becomes efficient.

Market Equilibrium

A situation where supply equals demand for a product.

Fixed Cost

Costs that do not vary with the level of output.

Variable Cost

Costs that vary with the level of output produced.

Total Revenue

The total receipts from sales of a product.

Price Taker

A firm that must accept the market price because it is too small to influence it.

Perfect Competition

A market structure characterized by a complete absence of rivalry among the individual firms.

Barriers to Entry

Obstacles that make it difficult for new firms to enter a market.

Short-run

A period in which at least one factor of production is fixed.

Long-run

A time frame in which all factors of production can be varied.

Consumer Surplus

The difference between what consumers are willing to pay for a good and what they actually pay.