ECON3 0.0 / 5 ? EconomicsCompetitive marketsA2/A-levelAQA Created by: samfisher2013Created on: 04-05-14 08:42 Short & long run Short term:at least one fixed factor - Long term:all f.o.p variable 1 of 18 Marginal returns Gain in output is more/less/equally proportionate to increase in input 2 of 18 Diminishing marginal returns Short term law, point will come when marginal product falls. 3 of 18 Efficiency Productive(lowest point of AC) and Allocative{(P)AR=MC} 4 of 18 Depreciation A fall in the value of an asset, for example capital like a machine. 5 of 18 Returns to scale Increase in outputs(makes the costs) is more/less/equally proportionate to increase in inputs 6 of 18 Minimum Efficient Scale(MES) Lowest point of output at which costs can be minimised 7 of 18 Normal profit The minimum cost for a firm to remain in an industry, as it could earn anything below this amount in another industry. 8 of 18 Supernormal profit Anything above normal profit. 9 of 18 Revenue for perfectly competitive firms Marginal and Average revenue is constant(the same) as the price charged for each unit is the same. 10 of 18 Maximising profit Achieved at MC=MR. 11 of 18 Objectives of a firm Manager, pi max, pi satisfice, social, market share, might not know where MC=MR 12 of 18 Divorce of ownership from control Selling shares=control manager+owners shareholders 13 of 18 Effects of technological change make the same output with less inputs, better quality, new products 14 of 18 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 15 of 18 Profit in p.c. markets Short term supernormal possible - Long term normal ONLY 16 of 18 Allocative efficiency When no one can be made better off without making someone else worse off. 17 of 18 Structure - performance - model one determines the other - contestability opposes this 18 of 18
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