Eco 3

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Normal profit
TR = TC – the amount needed to keep the firm in that industry in the long run
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Supernormal profit
TR > TC above that required to keep the firm in the industry in the long run
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Marginal profit
the profit gaining from producing one additional unit (MP is 0 when MC=MR)
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Shut down point
AVC = AR
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Patent
legal right to be the sole supplier of a good or service for a number of years to allow a firm to recoup it spending on R and D through SN profit
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Limit pricing
when a firm prices just below the AC of a potential new entrant. Requires moving away from Profit Maximisation and is only possible with EoS
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Predatory pricing
charging a price below AVC in the short run with THE DELIBERATE INTENTION OF forcing the exit of another firm to gain monopoly power in the long run
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Innocent barriers to entry – this is a barrier to entry which is due to an absolute cost advantage by the incumbent firm
Innocent barriers to entry – this is a barrier to entry which is due to an absolute cost advantage by the incumbent firm
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Other cards in this set

Card 2

Front

TR > TC above that required to keep the firm in the industry in the long run

Back

Supernormal profit

Card 3

Front

the profit gaining from producing one additional unit (MP is 0 when MC=MR)

Back

Preview of the back of card 3

Card 4

Front

AVC = AR

Back

Preview of the back of card 4

Card 5

Front

legal right to be the sole supplier of a good or service for a number of years to allow a firm to recoup it spending on R and D through SN profit

Back

Preview of the back of card 5
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