ECON3

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Short & long run
Short term:at least one fixed factor - Long term:all f.o.p variable
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Marginal returns
Gain in output is more/less/equally proportionate to increase in input
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Diminishing marginal returns
Short term law, point will come when marginal product falls.
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Efficiency
Productive(lowest point of AC) and Allocative{(P)AR=MC}
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Depreciation
A fall in the value of an asset, for example capital like a machine.
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Returns to scale
Increase in outputs(makes the costs) is more/less/equally proportionate to increase in inputs
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Minimum Efficient Scale(MES)
Lowest point of output at which costs can be minimised
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Normal profit
The minimum cost for a firm to remain in an industry, as it could earn anything below this amount in another industry.
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Supernormal profit
Anything above normal profit.
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Revenue for perfectly competitive firms
Marginal and Average revenue is constant(the same) as the price charged for each unit is the same.
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Maximising profit
Achieved at MC=MR.
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Objectives of a firm
Manager, pi max, pi satisfice, social, market share, might not know where MC=MR
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Divorce of ownership from control
Selling shares=control manager+owners shareholders
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Effects of technological change
make the same output with less inputs, better quality, new products
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Perfectly competitive markets
price takers, many buyers and sellers, homogeneous product, perfect info, perfect mobility of f.o.p, no barriers to entry and exit
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Profit in p.c. markets
Short term supernormal possible - Long term normal ONLY
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Allocative efficiency
When no one can be made better off without making someone else worse off.
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Structure - performance - model
one determines the other - contestability opposes this
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Other cards in this set

Card 2

Front

Gain in output is more/less/equally proportionate to increase in input

Back

Marginal returns

Card 3

Front

Short term law, point will come when marginal product falls.

Back

Preview of the back of card 3

Card 4

Front

Productive(lowest point of AC) and Allocative{(P)AR=MC}

Back

Preview of the back of card 4

Card 5

Front

A fall in the value of an asset, for example capital like a machine.

Back

Preview of the back of card 5
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