Midterm 2 class review notes Fall24

Average Revenue

Total revenue received per unit sold, calculated as Total Revenue divided by Quantity.

Profit Maximization in Perfect Competition

Occurs where Marginal Revenue (MR) equals Marginal Cost (MC).

Total Revenue

The total income a firm receives from selling goods and services, calculated as Price multiplied by Quantity.

Total Cost

The sum of fixed costs and variable costs incurred by a firm in producing goods.

Marginal Cost (MC)

The additional cost incurred by producing one more unit of a good.

Long-run Equilibrium

A situation where firms earn zero economic profits due to free entry and exit in the market.

Short-run Equilibrium

A situation where firms can earn positive or negative economic profits, with fixed resources.

Price Discrimination

The practice of charging different prices to different consumers for the same good or service.

Oligopoly

A market structure in which a few firms dominate, and each firm must consider the actions of others in their pricing and output decisions.

Nash Equilibrium

A situation in a game where each player is making the best decision possible, taking into account the decisions of other players.

Deadweight Loss

The loss in economic efficiency that occurs when the equilibrium outcome is not achievable or not achieved.

Market Equilibrium

A situation where the quantity demanded equals the quantity supplied at a particular price.

Dominant Strategy

A strategy that yields the highest payoff for a player regardless of what the other players choose.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service versus what they actually pay.

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive.

Perfect Competition

A market structure characterized by a large number of small firms, homogenous products, and low barriers to entry.

Monopolistic Competition

A market structure where many firms offer products that are similar but not perfect substitutes.

Prisoner's Dilemma

A standard example of a game in which two individuals do not cooperate, even if it is in their best interest to do so.

Efficient Scale

The quantity of output that minimizes average total cost.