Principles of Microeconomics: Long-Run Costs and Output Decisions

These flashcards cover key vocabulary terms and concepts from Chapter 9 of Principles of Microeconomics, focusing on long-run costs and output decisions.

Short-Run Conditions

Temporary situations affecting a firm's immediate behavior in the marketplace.

Long-Run Directions

Overall strategies firms employ to adjust to market conditions over time.

Economies of Scale

Cost advantages firms experience as they increase output, leading to lower average costs.

Diseconomies of Scale

Increased average costs that occur when a firm becomes too large and inefficient.

Long-Run Average Cost Curve (LRAC)

Graph showing how average costs change with output in the long run.

Shutdown Point

The level of production where total revenue is less than total variable cost.

Short-Run Industry Supply Curve

The sum of the marginal cost curves of all firms that are willing to produce at a given price.

Long-Run Competitive Equilibrium

A market situation where firms make zero economic profit and resource allocation is optimal.

Minimum Efficient Scale (MES)

The lowest output level at which long-run average costs are minimized.

Constant Returns to Scale

When an increase in production does not affect per-unit costs.

Long-Run Industry Supply Curve (LRIS)

Illustrates how price and total output change as an industry expands over the long run.

External Economies

Benefits that accrue to all firms in an industry when the industry expands.

External Diseconomies

Costs that all firms in an industry incur when the industry expands.

Long-Run Adjustments

Changes firms make to their operations over time in response to market conditions.