Microeconomic Principles - Competition and Costs 7-9

Flashcards created based on the concepts presented in the lecture notes covering competition, costs, economic concepts, and labor.

Cost of a Good

The amount of money the seller has to spend to produce a good.

Fixed Costs (FC)

Costs that do not vary with the quantity of units produced.

Variable Costs (VC)

Costs that vary with the quantity of units produced.

Total Cost (C)

The cost of producing a certain quantity of units of a good, calculated as C = FC + VC.

Marginal Cost (MC)

The cost of producing one more unit of a good.

Law of Diminishing Marginal Returns

States that with a fixed input, and an increasing variable input, at some point the marginal product of the variable input must decline.

Average Total Cost

The total cost divided by the quantity of units produced.

Economies of Scale

The range where long run average total costs decrease as output increases.

Diseconomies of Scale

The range where long run average total costs increase as output increases.

Transaction Costs

Any costs of going through with an exchange transaction, other than the price of the good itself.

Externality

An economic activity that confers a benefit or imposes a cost on an unrelated third party.

Pigovian Tax/Subsidy

A tax/subsidy intended to correct an externality problem.

Coasian Bargain

When people solve an externality problem through private negotiation rather than active government regulation.

Marginal Revenue Product

The marginal product of labor multiplied by marginal revenue.

Labor Union

A group of workers who voluntarily join together to bargain with their employer as a team.

Strike

When employees stop working until their employer grants certain demands.

Picket Line

When striking union workers line up in front of their former workplace to prevent others from replacing them.

Deferred Consumption

Consuming less in the present in anticipation of consuming more in the future.