Chapter 6 - Perfectly competitive supply
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45 Terms
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Producer surplus
________: amount by which price exceeds the seller's reservation price.
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Long run
________: period of time of sufficient length that all the firm's factors of production are variable.
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significant influence
Perfectly competitive market: market in which no individual supplier has ________ on the market price of the product.
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Short run
________: period of time sufficiently short that at least some of the firm's factors of production are fixed.
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Profit
________: total revenue a firm receives from the sale of its product minus all costs- explicit and implicit- incurred in producing it.
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Price taker
________: firm that has no influence over the price at which it sells its product.
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Profit
________= Total revenue- Variable cost- Fixed cost.
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Profit-maximizing firm
firm whose primary goal is to maximize the difference between its total revenues and total costs
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Perfectly competitive market
market in which no individual supplier has significant influence on the market price of the product
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Price taker
firm that has no influence over the price at which it sells its product
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Imperfectly competitive firm
firm that has at least some control over the market price of its product
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Factor of production
input used in the production of a good/service
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Short run
period of time sufficiently short that at least some of the firm's factors of production are fixed
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Long run
period of time of sufficient length that all the firm's factors of production are variable
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Law of diminishing returns
property of the relationship between the amount of a good/service produced and the amount of a variable factor required to produce it; the law says that when some factors of production are fixed, increased production of the good eventually requires ever-larger in creases in the variable factor
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Fixed factor of production
input whose quantity cannot be altered in the short run
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Variable factor of production
input whose quantity can be altered in the short run
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Fixed cost
sum of all payments made to the firm's fixed factors of production
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Variable cost
sum of all payments made to the firm's variable factors of production
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Total cost
sum of all payments made to the firm's fixed and variable factors of production
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Marginal cost
as output changes from one level to another, the change in total cost divided by the corresponding change in output
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Profit = Total revenue
Total cost
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Average variable cost (AVC)
variable cost divided by total output
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Average total cost (ATC)
total cost divided by total output
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Profitable firm
firm whose total revenue exceeds its total cost
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Producer surplus
amount by which price exceeds the seller's reservation price
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Profit
Total revenue a firm receives from the sale of its product minus all costs explicit and implicit incurred in producing it
28
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Profit-maximizing firm
Firm whose primary goal is to maximize the difference between its total revenues and total costs
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Perfectly competitive market
Market in which no individual supplier has significant influence on the market price of the product
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Price taker
Firm that has no influence over the price at which it sells it its product
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Imperfectly competitive firm
Firm that has at least some control over the market price of its product
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Factor of production
Input used in the production of a good/service
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Short run
Period of time sufficiently short that at least some of the firm's factors of production are fixed
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Long run
Period of time of sufficient length that all the firm's factors of production are variable
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Law of diminishing returns
Property of the relationship between the amount of a good/service produced and the amount of a variable factor required to produce it; the law says that when some factors of production are fixed, increased production of the good eventually requires ever-larger in creases in the variable factor
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Fixed factor of production
Input whose quantity cannot be altered in the short run
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Variable factor of production
Input whose quantity can be altered in the short run
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Fixed cost
Sum of all payments made to the firm's fixed factors of production
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Variable cost
Sum of all payments made to the firm's variable factors of production
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Total cost
Sum of all payments made to the firm's fixed and variable factors of production
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Marginal cost
As output changes from one level to another, the change in total cost divided by the corresponding change in output
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Average variable cost (AVC)
Variable cost divided by total output
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Average total cost (ATC)
Total cost divided by total output
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Profitable firm
Firm whose total revenue exceeds its total cost
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Producer surplus
Amount by which price exceeds the seller's reservation price