microeconomics 2 :)

  1. short run*
    the time period during which at least one input, such as plant size, cannot be changed; a period of time too brief to alter plant capacity, yet long enough to change the level at which the fixed plant is used
  2. plant size
    the physical size of the factories that a firm owns and operates to produce its output. Plant size can be defined by square footage, maximum physical capacity, and other physical measures
  3. long run*
    the time period during which all factors of production can be varied; a period of time extensive enough for firms to change all resources employed including plant capacity
  4. production
    any activity that results in the conversion of resources into products that can be used in consumption
  5. production function
    the relationship between inputs and maximum physical output. A production function is a technological, not an economic, relationship
  6. average physical product*
    equation= total product (TP) divided by L; output per worker
  7. marginal physical product*
    the physical output that is due to the addition of one more unit of a variable factor of production; the change in total product occurring when a variable input is increased and all other inputs are held constant; also called marginal product; the change in total output associated with each additional input of labor. equation= change in TP / change in L
  8. law of diminishing marginal product*
    the observation that after some point, successive equal-sized increases in a variable factor of production, such as labor, added to fixed factors of production, will result in smaller increases in output; as successive units of a variable resource (labor) are added to a fixed resource (capital or land), beyond some point the extra or marginal product attributable to each additional unit of the variable resource will decline
  9. total costs*
    the sum of total fixed costs and total variable costs
  10. fixed costs*
    costs that DO NOT vary with changes in output. fixed costs typically include such things as rent on a building. These costs are fixed for a certain period of time (in the long run, though, they are variable)
  11. varibale costs*
    costs that DO vary with the rate of production or level of output. They include wages paid to workers and purchases of materials
  12. average fixed costs
    total fixed costs divided by the number of units produced
  13. average variable costs
    total variable costs divided by the number of units produced
  14. total product*
    output resulting from combining each level of labor with a fixed amount of capital
  15. average total costs
    total costs divided by the number of units produced; sometimes called average per-unit total costs
  16. marginal costs*
    the change in total costs due to a one-unit change in production rate; the extra or additional cost of producing one more unit of output; equation= change in total cost / change in quantity
  17. planning horizon
    the long run, during which all inputs are variable
  18. long-run average cost curve*
    the locus of points representing the minimum unit cost of producing any given rate of output, given current technology and resource prices; shows the least per unit cost at which any output can be produced after the firm has had time to make all appropriate adjustments in its plant size
  19. planning curve
    the long-run average cost curve
  20. economies of scale*
    decreases in long-run average costs resulting from increases in output; as a plant size increases, a number of factories will for a short time lead to lower average costs of production
  21. constant returns to scale
    no change in long-run average costs when output increases
  22. diseconomies of scale*
    increases in long-run average costs that occur as output increases; the expansion of a firm leads to higher per unit costs
  23. minimum efficient scale (MES)*
    the lowest rate of output per unit time at which long-run average costs for a particular firm are at a minimum
  24. perfect competition
    a market structure in which the decisions of individual buyers and sellers have no effect on market price
  25. perfectly competitive firm
    a firm that is such a small part of the total industry that it cannot affect the price of the product it sells
  26. price taker
    a perfectly competitive firm that must take the price of its product as a given because the firm cannot influence its price
  27. total revenues
    the price per unit times the total quantity sold
  28. profit-maximizing rate of production
    the rate of production that maximizes total profits, or the difference between total revenues and total costs; also, the rate of production at which the marginal revenue equals marginal cost
  29. marginal revenue
    the change in total revenues resulting from a change in output (and sale) of one unit of the product in question
  30. short-run break-even price
    the price at which a firm's total revenues equal its total costs. at the break-even price, the firm is just making a normal rate of return on its capital investment. (it is covering its explicit and implicit costs)
  31. short-run shutdown price
    the price that covers average variable costs. it occurs just below the intersection of the marginal cost curve and the average variable cost curve
  32. industry supply curve
    the locus of points showing the minimum prices at which given quantities will be forthcoming; also called the market supply curve
  33. signals
    compact ways of conveying to economic decision makers information needed to make decisions. an effective signal not only conveys information but also provides the incentive to react appropriately. economic profits and economic losses are such signals
  34. Long-run industry supple curve
    A market supple curve showing the relationship between prices and quantities after firms have been allowed the time to enter into or exit from an industry, depending on whether there have been positive or negative economic profits
  35. Constant-cost industry*
    An industry whose total output can be increased without an increase in long-run per-unit costs; its long-run supply curve is horizontal
  36. Increasing-cost industry*
    An industry in which an increase in industry output is accompanied by an increase in long-run per-unit costs, such that the long-run industry supply curve slopes upward
  37. Decreasing-cost industry*
    An industry in which an increaae in output leads to a reduction in long-run per-unit costs, such that the long-run industry supple curve slopes downward
  38. Marginal cost pricing
    A system of pricing in which the price charged is equal to the opportunity cost to society of producing one more unit of the good or service in question. The opportunity cost is the marginal cost to society
  39. Market failure*
    A situation in which an unrestrained market operation leads to either too few or too many resources going to a specific economic activity; over production or under production of a good or service; externalities and public goods
  40. product market*
    sellers side of the market
  41. economic efficiency*
    It is impossible to increase the output of any good without lowering the value of the total output produced in the economy
  42. monopoly/monopolist*
    a single supplier of a good or service for which there is no close substitute, the firm and the industry are one and the same
  43. natural monopoly
    a monopoly that arises from the peculiar production characteristics in an industry. It usually arises when there are large economies of scale relative to the industry's demand such that one firm can produce at a lower average cost than can be achieved by multiple firms
  44. tariffs
    taxes on imported goods
  45. cartel
    an association of producers in an industry that agree to set common prices and output quotas to prevent competition
  46. price searcher
    a firm that must determine the price-output combination that maximizes profit because it faces a downward-sloping demand curve
  47. price discrimination*
    selling a given product at more than one price, with the price difference being unrelated to differences in marginal cost; sellers charging different groups different prices that not cost justified
  48. price differentiation*
    establishing different prices for similar products to reflect differences in marginal cost in providing those commodities to different groups of buyers (cost justified) (ex. kids menu)
  49. allocative inefficiency*
    restrict output to get higher prices
  50. productive inefficiency*
    products not produced in the least costly way
  51. monopolistic competition*
    a relatively large number of producers offer similar but differentiated products; a market situation in which a large number of firms produce similar but not identical products. Entry into the industry is relatively easy
  52. P>MC - allocative inefficiency*
    under allocation of resources, society values additional units more highly than the alternative products the resources could have produced
  53. P>min ATC - productive inefficiency*
    firms find it profitable to restrict output and employ fewer resources
  54. direct marketing*
    advertising engaged in personalized advertising, and target at specific consumers, in the form of phone, mail, or email
  55. mass marketing*
    advertising that aims a message at as many customers as possible - tv, radio, newspapers, magazines
  56. product differentiation
    the distinguishing of products by brand name, color, and other minor attributes. product differentiation occurs in other than perfectly competitive markets in which products are, in theory, homogeneous, such as wheat or corn
  57. interactive marketing*
    advertising that allows consumers to respond directly to advertised message - trade shows, sales booths
  58. search goods*
    assess in advance of purchase; a product with characteristics that enable an individual to evaluate the product's quality in advance of a purchase (ex. samples in the mail)
  59. experience goods*
    product that must be consumed before it can be assessed and the quality can be established
  60. credence goods*
    difficult to assess even after consumption; a product with qualities that consumers lack the expertise to assess without assistance
  61. informational products*
    industries which entail relatively high fixed costs due to information intense inputs; the first copy entails sizeable up-front costs, once created however, making additional copies can be very inexpensive (ex. video games)
  62. informational advertising
    advertising that emphasizes transmitting knowledge about the features of a product
  63. persuasive advertising
    advertising that is intended to induce a consumer to purchase a particular product and discover a previously unknown taste for the item
  64. short-run economies of operation
    a distinguishing characteristics of an information product arising from declining short-run average total cost as more units of the product are sold
  65. oligopoly*
    an industry dominated by a few large firms (steel, farm implements, household appliances); very few sellers. each seller knows that the other sellers will react to its changes in prices, quantities, and qualities3
  66. strategic dependence
    a situation in which one firm's actions with respect to price, quality, advertising, and related changes may be strategically countered by the reactions of one or more other firms in the industry. Such dependence can exist only when there are a limited number of major firms in an industry
  67. vertical merger*
    when a firm purchases an input/resource product or the seller of its products; the joining of a firm with another to which it sells an output or from which it buys an input
  68. horizontal mergers*
    buying firms at the same level; the joining of firms that are producing or selling a similar product
  69. conglomerate ratio*
    firms in different market sectors owned by one parent company; the percentage of all sales contributed by the leading four or leading eight firms in an industry; sometimes called the industry concentration ratio
  70. reaction function
    the manner in which one oligopolist reacts to a change in price, output, or quality made by another oligopolist in the industry
  71. game theory
    a way of describing the various possible outcomes in any situation involving two or more interacting individuals when those individuals are aware of the interactive nature of their situation and plan accordingly. the plans made by these individuals are known as game stategies
  72. price leadership*
    leading firm (usually the largest) sets its price and others follow, because of the laws against collusion firms cannot communicate directly; a practice in many oligopolistic industries in which the largest firm published its price list ahead of its competitors, who then match those announced prices. also called parallel pricing
  73. cooperative game
    a game in which the players explicitly cooperative to make themselves better off. as applied to firms, it involves companies colluding in order to make higher than perfectly competitive rates of return
  74. noncooperative game
    a game in which the players neither negotiate nor cooperate in any way. as applied to firms in an industry, this is the common situation in which there are relatively few firms and each has some ability to change price
  75. zero-sum game*
    a game in which any gains within the group are exactly offset by equal losses by the end of the game; one player's losses offset by other players gain
  76. negative-sum game*
    a game in which players as a group lose at the end of the game
  77. positive-sum game*
    a game in which players as a group end off better at the end of the game
  78. strategy*
    any rule that is used to make a choice, such as "always pick heads"
  79. dominant strategies
    strategies that always yield the highest benefit. regardless of what other players do, a dominant strategy will yeild the most benefit for the player using it
  80. opportunistic behavior
    actions that focus solely on short-run gains because long-run benefits of cooperation are perceived to be smaller
  81. tit-for-tat strategic behavior
    in game theory, cooperation that continues as long as the other players continue to cooperate
  82. price war
    a pricing campaign designed to capture additional market share by repeatedly cutting prices
  83. entry deterrence strategy
    any strategy undertaken by firms in an industry, either individually or together, with the intent or effect of raising the cost of entry into the industry by a new firm
  84. limit-pricing model
    a model that hypothesizes that a group of colluding sellers will set the highest common price that they believe they can charge without new firms seeking to enter that industry in search of relatively high profits
  85. network effect
    a situation in which a consumer's willingness to purchase a good or service is influences by how many others also buy or have bought the item
  86. positive market feedback
    a tendency for a good or service to come into favor with additional consumers because other consumers have chosen to buy the item
  87. negative market feedback
    a tendency for a good or service to fall out of favor with some consumers because other consumers have stopped purchasing the item
  88. marginal physical product (MPP)*
    the change in output, or total product produced, resulting from the addition of one more unit of resource. the MPP of the worker equals the change in total output accounted for by hiring the worker, holding all other factors of production constant. MPP= change in total product/change in our resource
  89. marginal revenue product (MRP)*
    the marginal physical product (MPP) times marginal revenue (MR). the MRP gives the additional revenue obtained from a one-unit change in labor input; change in the firms total revenue from using one more unit of a resource. MRP= change in total revenue/ change in revenue
  90. marginal resource cost*
    change in total resource cost from using one more unit of a resource. MRC= change in total cost/ change in resource
  91. marginal factor cost (MFC)
    the cost of using an additional unit of an input. for example, if a firm can hire all the workers it wants at the going wage rate, the marginal factor cost of labor is the wage rate
  92. derived demand*
    input factor demand derived from demand for the final product being produced; the demand for the finished product determines the demand for resources
  93. outsourcing*
    a firm's employment of labor outside the country in which the firm is located
  94. labor unions*
    worker organizations that seek to secure economic improvements for their members; they also seek to improve the safety, health, and other benefits (such as job security) of their members
  95. The Wagner Act 1935*
    Gave unions the right to organize workers and to engage in collective bargaining (National Labor Relations Act)
  96. craft unions
    labor unions composed of workers who engage in a particular trade or skill, such as baking, carpentry, or plumbing
  97. collective bargaining*
    negotiation and/or bagaining between the management of a company or of a group of companies and the management of a union or a group of unions for the purpose of reaching a mutually agreeable contract that sets wages, fringe benefits, and working conditions for all employees in all the unions involved
  98. Taft-Hartley Act 1947*
    right to work laws, closed shops, jurisdictional disputes, sympathy strikes, secondary boycotts; established 80 day cooling off period--a court injunction could be used to delay a strike if the nation's safety or health would be impacted (air traffic controller strike)
  99. industrial unions
    labor unions that consist of workers from a particular industry, such as automobile manufacturing or steel manufacturing
  100. right-to-work laws*
    laws that make it illegal to require union membership as a condition of continuing employment in a particular firm; laws that made it illegal to require union membership as condition of continuing employment
  101. closed shop*
    a business enterprise in which employees must belong to the union before they can be hired and must remain in the union after they are hired; requires union membership before employment can be obtained (illegal)
  102. union shop*
    a business enterprise that may hire nonunion members, conditional on their joining the union by some specified date after employment begins; does not require membership before being hired, however it requires membership after a specific period of time
  103. jurisdictional dispute*
    a disagreement involving two or more unions over which should have control of a particular jurisdiction, such as a particular craft or skill or a particular firm or industry; disputes involving two or more unions over who has control of a particular jurisdiction (prohibited)
  104. sympathy strike
    a work stoppage by a union in sympathy with another union's strike or cause (prohibited)
  105. secondary boycott*
    a refusal to deal with companies or purchase products sold by companies that are dealing with a company being struck (prohibited)
  106. employee free choice act*
    provide working people the freedom to form a union and bargain collectively without corporate intimidation
  107. strikebreakers
    temporary or permanent workers hired by a company to replace union members who are striking
  108. featherbedding*
    any practice that forces employers to use more labor than they would otherwise or to use existing labor in an inefficient manner (ex. have painters paint using brush not spray so that 3 people can do it in a day with a bursh instead of 1 using spray)
  109. monopsonist
    the only buyer in a market
  110. monopsonistic exploitation
    paying a price for the variable input that is less than its marginal revenue product; the difference between marginal revenue product and the wage rate
  111. bilateral monopoly*
    a market structure consisting of a monopolist and a monopsonist; a single buyer faces a single seller
  112. demand enhancement*
    (one of the three union models) increases the demand for the product and it will lead to increased wages and employment
  113. exclusive or craft union*
    (one of the three union models) by reducing the supply of labor, unions achieve higher wage rates
  114. inclusive or industrial union*
    (one of the three union models) seek all available workers (skilled, semiskilled, unskilled) this gives great strength to the union
Card Set
microeconomics 2 :)
normandale microeconomics second half