dennis wilson wku econ quiz 5

time frame

capital is fixed in the short run

production

method of turning inputs outputs

total production curve

relationship between labor and the output produced ceteris paribus

marginal production of labor

the change in output form one additional unit of labor

diminishing returns

as one input increases while the other inputs are held fixed, outputs increases at a decreasing rate

Variable cost

cost that vary with the quantity produced expaper

fixed cost

cost that does not vary

total cost

fixed cost + variable cost = total cost

average fixed cost

fixed cost divided by quantity produced FC/Q

average variable cost

variable cost divided by quantity produced VC/Q

average total cost

*U shaped* average fixed cost + average variable cost = average total cost

market power

ability to affect the market price by restricting output to increase price

Monopoly

one firm, unique product, ability to limit entry

oligopoly

new firms, similar product, ability to limit entry, cooperate or compete

monopolistic completion

several firms, similar product, no limit to entry

competition

many firms, same product, no limit to entry

long run total cost

the total cost of production when the firm is perfectly flexile in choosing any and all of its inputs

long run average cost

the long run cost divided by the quality produced LTC/Q = LAC

competitive market has:

many sellers and buyers, homogenous product, no barriers to entry, perfect information, firms and profits maximizers

profits

since any individual firm cannot affect the market price TR-TC = profits

price taker

a buyer or seller that takes the market price as given

total revenue

proportional to the amount of output

marginal revenue

change in total revenue from additional unit sold AS FIRM QUALITY INCREASES, THE PRUCE REMAINS THE SAME MR = TR/Q

market power

the more competition, the less market power

the less competition, the more market power