Economics: Supply, Producer Surplus, and Competitive Equilibrium

Flashcards to review key concepts related to supply elasticity, producer surplus, economies of scale, and long-run competitive equilibrium.

Elastic Supply

A large change in quantity supplied for a small change in price.

Inelastic Supply

A small change in quantity supplied for a large change in price.

Producer Surplus

The difference between the market price and the minimum price a firm is willing to accept (marginal cost).

Economies of Scale

As a firm increases production, average total cost (ATC) decreases because fixed costs are spread over a larger output.

Diseconomies of Scale

At some point, increasing production causes ATC to increase, often due to managerial inefficiencies.

Constant Returns to Scale

Average total cost (ATC) remains the same as output increases.

Long-Run Competitive Equilibrium

In the long run, firms enter the market if economic profits are earned, raising supply and decreasing prices until profits are zero.