Economics Fundamentals and Market Structures Flashcards

Vocabulary flashcards generated from formative quiz material covering economic efficiencies, specialization, market structures, market failure concepts, tax types, and business integration strategies.

Productive Efficiency

The ability to produce a given level of output using the minimum amount of inputs or resources, focusing on minimizing costs and optimizing the production process.

Technical Efficiency

Achieved when the maximum possible output is produced using a given set of inputs or resources and the optimal utilization of available technology.

Dynamic Efficiency

Refers to a situation where technological advancements, research, and innovation are utilized over time to improve productivity and products.

Allocative Efficiency

Occurs when resources are optimally allocated to produce the combination of goods and services that best satisfies consumer preferences, where marginal benefit equals marginal cost.

Labour Specialization

When individuals or groups focus on developing specific skills and expertise to perform particular tasks or occupations efficiently.

Capital Specialization

Specialization involving the accumulation and deployment of financial resources, tools, and machinery for specific production processes.

Land Specialization

Allocating specific areas or regions for specific economic activities based on suitability factors such as climate, proximity to labor, and natural resources.

External Economies of Scale

Cost advantages that multiple firms within an industry or geographic location enjoy collectively due to factors outside individual firm control, such as industry associations or shared infrastructure.

Internal Economies of Scale

Cost advantages that an individual firm experiences due to its own internal growth and expansion, such as increased labor specialization or bulk purchasing.

Law of Diminishing Marginal Returns

Economic principle stating that as additional units of a variable input are added to a fixed input, the marginal product of the variable input will eventually decrease.

Consumer Sovereignty

The power of consumers to dictate what goods and services are produced through their purchasing decisions.

Fixed Costs

Expenses that remain constant in the short run regardless of the level of production or sales volume, such as factory rent or insurance.

Variable Costs

Expenses that fluctuate in direct proportion to the level of production or business activity, such as raw material inputs.

Marginal Cost

The additional cost incurred by producing one additional unit of output.

Marginal Revenue

The additional revenue earned from selling one additional unit of output.

Monopolistic Competition

A market structure characterized by a large number of firms selling differentiated products, with relatively easy entry and exit barriers and high non-price competition.

Monopoly

A market structure where a single firm dominates the market with no close substitutes, high barriers to entry, and the highest degree of market power.

Oligopoly

A market structure dominated by a few large firms that exhibit high interdependence, strategic decision-making, and high barriers to entry.

Perfect Competition

A market structure characterized by many small firms, homogeneous products, no barriers to entry or exit, and perfect information, leading to the most desirable economic outcomes.

Duopoly

A specific type of oligopoly where only two dominant firms control most of the market share.

Asymmetric Information

A form of market failure where one party in a transaction possesses more or superior information than the other, leading to potential exploitation or imbalance.

Externalities

A market failure that arises when the production or consumption of a good or service affects third parties who are not directly involved in the transaction.

Public Goods

Goods or services that are non-excludable and non-rivalrous in consumption.

Partial Market Failure

Occurs when market conditions lead to inefficient resource allocation in a particular aspect or sector of the economy, but the market continues to function.

Complete Market Failure

A situation where an entire market fails to allocate resources efficiently and private firms have no incentive to produce a good or service without government intervention.

Tragedy of the Commons

A situation where individuals acting in their own self-interest deplete or degrade a shared, non-owned common resource available to all.

Factor Mobility

The ease with which factors of production, such as labor and capital, can move between different sectors or geographic locations within an economy.

Factor Immobility

The limited ability of factors of production to move between uses or locations due to barriers such as specialized skill requirements or relocation costs.

Direct Taxation

Taxes levied directly on individuals or entities based on their income or assets and paid directly to the government, such as income tax.

Indirect Taxation

Taxes imposed on the consumption of goods and services, collected by intermediaries who pass the tax burden on to consumers, such as a $10\%$ Goods and Services Tax (GST).

Primary Production

Economic activities involving the direct extraction and harvesting of natural resources from the environment, including farming, fishing, and mining.

Secondary Production

Also known as manufacturing or industrial production, this involves transforming raw materials into finished or intermediate goods.

Vertical Integration

A strategy to gain market power by expanding operations along the supply chain, either backward into suppliers or forward into distribution channels.

Horizontal Integration

A strategy to gain market power by merging with or acquiring rival firms operating in the same industry or market segment.