Microeconomics Final Exam Vocab
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52 Terms
collusion
Agreement between rivals to limit competition with each other
Illustrates how quantity demanded by buyers from individual business varies as it changes the price it charges
Market featuring a few competitors, but with sufficiently limited competition that sellers still have some market power. ie, oligopoly and monopolistic competition
Addition to total revenue from selling one more unit
the extent to which a seller can charge a higher price without losing many sales to a competitor
Market structure in which many competing small business sell differentiated products. More market power is derived from more different products
Market structure in which there is only one seller in the market with lots of market power
Market in which it is cheapest for a single business to service the market
Market structure with only a handful of large sellers with substantial market power
Market structrue where all businesses in an industry sell identical goods and have no market power
Making products more different from those of competitors
Sell one more item if the marginal revenue is greater than or equal to the marginal cost
Output Effect
Gain revenue from selling a larger quantity of items
Discount Effect
Losing revenue from lowering price
Differences in wages required to offset desirable and undesirable aspects of a job
Treating people differently based on characteristics like sex, race, ethnicity, sexual orientation, gender identity, religion, disability, social class, etc.
Higher wage paid to encourage worker productivity
Desire to do something for its external rewards such as higher pay
Skills useful to many employers
Accumulated knowledge and skills that increase productivity
Judgments shaped by unconscious attribution of particular qualities to members of a group
Bias against disadvantaged groups that is embedded in laws and institutions
Desire to do something for the enjoyment of the activity itself
Skills only useful in a job with one particular employer
Businesses using bargaining power as a major buyer to pay lower prices including lower wages
Linking income of workers to measures of their performance. ie, commissions, piece rates, bonuses, promotions.
Taste-based discrimination; discriminating by preference rather than reason.
Action to credibly convey information that may otherwise by hard to verify
Relying on stereotypes or average characteristics of a group to make inferences
Licensing Laws
Government laws that make it illegal to work in certain occupations without meeting certain requirements
Marginal revenue product
Measures marginal revenue from hiring an additional worker
Marginal Product of Labor
Extra production from hiring an extra worker
Rational Rule for Employers
Hire an additional worker if the marginal revenue product exceeds the wage paid
Total revenue minus explicit costs
Economic Profit
Total revenue minus explicit financial costs minus opportunity costs
Cost per unit, calculated as your firm’s total costs divided by the quantity produced
Revenue per unit, calculated as total revenue divided by the quantity supplied
Obstacles making it difficult for new suppliers to enter a market
When there are no factors making it particularly difficult or costly for a business to enter or exit an industry
Production capacity and competitors can change
Profits per unit sold; profit margin = average revenue minus average cost
Enter a market if you expect to earn a positive economic profit, which occurs when the price exceeds your average cost
Exit the market if you expect to earn a negative economic profit, which occurs if the price is less than your average costs
short run
The horizon over which the production capacity, and the number and type of competitors you face cannot change
switching costs
Impediment making it costly for consumers to switch to buying from another business
Selling different goods together as a package
Price discrimination by charging different prices to different groups of people
Tweak incentives in just the right way to induce customers to sort themselves into high and low reservation prices
Selling product at each customer’s reservation price
Selling the same product at different prices hoping to charge each individual the maximum price they are willing to pay
When the per-unit price is lower when you purchase a larger quantity
Maximum price a customer will pay for a product