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firms are price takers, easy entry/exit, many buyers/sellers, homogeneous product, perfect knowledge |
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Why do we study perfect competition when there is no real world example of this type of market structure? |
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We study it to show why the move towards competition is desirable |
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positive economic profits |
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entry, capital moves towards the activity |
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negative economic profits |
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capital moves away from the economic activity |
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no change, capital is no different |
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where will a firm produce on the MR and MC curves |
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Definition
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What is the rule use to determine where a firm will produce? |
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• Profit is maximized when the additional revenue from producing and selling an additional unit of output equals the additional cost |
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what is the formula for TR |
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what is the formula for TC |
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what is the formula for TFC |
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what is the formula for profits |
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as the size of a firm increase its per-unit cost declines. o If economies of scale exist, a larger firm can produce a product at a lower per-unit cost than can a smaller firm |
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Brand names and reputation, Guarantees and warranties |
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Internal strategic assets |
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Anything that gives a firm an advantage and is not easily imitated serves as a strategic asset Ex: patents, licenses, brand names |
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Why did the antitrust laws come about? |
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o Came about to control growth of monopolies and prevent firms from engaging in undesirable practices (or minimize monopoly power) |
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two categories of government regulation |
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Definition
• Refers to the prescribing of prices and output levels for a particular industry or line of business |
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