Chapter 15: Entry, Exit, and Long-Run Profitability

These flashcards cover key vocabulary terms related to Chapter 15 on Entry, Exit, and Long-Run Profitability, helping to reinforce understanding of essential economic concepts.

Economic Profit

The total revenue a business receives, less both explicit financial costs and the entrepreneur’s implicit opportunity costs.

Accounting Profit

The total revenue a business receives minus its explicit financial costs.

Opportunity Costs

The loss of potential gain from other alternatives when one alternative is chosen.

Average Revenue

The revenue per unit of output, calculated as total revenue divided by quantity supplied.

Average Cost

The total costs (including fixed and variable costs) divided by the quantity produced.

Barriers to Entry

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

Free Entry and Exit

The ability for firms to enter or exit a market without restrictions.

Profit Margin

The difference between the price and average costs per unit.

Demand Curve

A graph showing the quantity of a good that consumers are willing to purchase at different prices.

Implicit Costs

Costs that represent lost opportunities, such as forgone wages or interest.

Explicit Costs

Direct, out-of-pocket expenses for running a business.

Zero Economic Profit

A situation in which total revenue equals total costs, including both explicit and implicit costs.

Diminishing Marginal Product

A decrease in the additional output generated by an additional unit of input.

Supply-Side Strategies

Methods that create cost advantages for existing firms, making it difficult for new entrants to compete.

Demand-Side Strategies

Methods to lock in customers and create loyalty, making it harder for new competitors to win over existing customers.

Entry Deterrence Strategies

Tactics used by incumbent firms to prevent potential competitors from entering the market.

Long-Run Equilibrium

A state in which economic profits are zero, and price equals average cost.

Market Power

The ability of a firm to raise prices above marginal cost without losing all customers.

Network Effects

A phenomenon where a product becomes more valuable as more people use it.

Regulatory Strategies

Government policies or procedures that restrict market entry or create advantages for existing firms.