F583 - The global economy - globalisationMarket structures and competitive behaviour in leisure's market

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Short run
the time period when at least one factor of production, usually capital is in fixed supply
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Fixed costs
costs that do not change in the short run will changes in output
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Variable costs
costs that changes with changes in output
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Average cost
total cost divided by output; also called unit cost
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Average fixed cost
total fixed cost divided by output
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Average variable cost
total variable cost divided by output
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Marginal cost
the change in the total cost resulting from changing output by one unit
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Long run
the period of time when it is possible to after all factors of production
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Economy of scale
a reduction in long-run average costs resulting from an increase in the scale of production
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Diseconomy of scale
an increase in long-run average costs caused by an increase in the scale of production
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Minimum efficient scale
the lowest level of output at which full advantage can be take of economies of scale
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Constant returns of scale
long-run average cost remaining unchanged when the scale of production increases
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Internal economies of scale
economies of scale that occur within the firm as a result of its growth
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External economies of scale
economies of scale that result from the growth of an industry and benefit firms within the industry
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Internal diseconomies of scale
diseconomies of scale experienced by a firm caused by its growth
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External economies of scale
economies of scale that result from the growth of an industry and benefit within the industry
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Internal diseconomies of scale
diseconomies of scale experienced by a firm caused by its growth
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External diseconomies of scale
diseconomies of scale resulting from the growth of the industry, affecting firms within the industry
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Average revenue
total revenue divided by the output sold
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Marginal revenue
the change in the total revenue resulting from the sale of one more unit
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Perfect competition
a market structure with many buyers and sellers, free entry and exit and an identical product
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Price taker
a firm that has no influence on price
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Price maker
a firm that influences price when it changes its output
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Unit elasticity of demand
when a given percentage change in price causes an equal percentage change in demand, leaving total revenue unchanged
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Predatory pricing
setting price low with the aim of forcing rivals out the market
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Superior good
a good with positive income elasticity of demand greater than one
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Barriers to entry
obstacles to new firms entering a market
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Barriers to exit
obstacles to firms leaving a market
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Sunk costs
costs incurred by a firm that it cannot recover should it leave the market
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Limit pricing
setting a price low to discourage the entry of new firms into the market
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Profit maximisation
achieving the highest possible profit when marginal costs equals marginal revenue
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Supernormal profit
profit earned where average revenue exceeds average cost
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Normal profit
the level of profit needed to keep a firm in the market in the long run
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Natural monopoly
a market where long-run average costs are lowest when output is produced by one firm
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Legal monopoly
a market where a firm has a share of 25% or more
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Dominant monopoly
a market where a firm has a 40% or more share
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Oligopoly
a market structure dominated by a few large firms
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Kinked demand curve
a demand curve made up of two parts, it suggests oligopolists follow each others' price reductions, but not price rises
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Cartel
a group of firms that produce separately but sell at one agreed price
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Game theory
a theory of how decision makers are influenced buy the actions and reactions of others
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Monopolistic competition
a market structure in which there is a large number of small firms selling a similar product
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Incumbent firms
firms already in the market
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Contestable market
a market in which there are no barriers to entry and exit and the costs facing incumbent and new firms are equal
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Dynamic efficiency
efficiency in terms of developing and introducing new production techniques and new products
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X inefficiency
the difference between the actual costs and attainable costs
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Hit-and-run competition
firms quickly entering a market when there are supernormal profits and leaving it when the profits disappear
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Sales revenue maximisation
the objective of achieving as high a total revenue as possible
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Growth maximisation
the objective of increasing the size of the firm as much as possible
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Profit satisficing
aiming for a satisfactory level of profit rather than the highest level of profit possible
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Stakeholders
people affected by the activities of a firm
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Utility maximisation
the aim of trying to achieve as much satisfaction as possible
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Other cards in this set

Card 2

Front

costs that do not change in the short run will changes in output

Back

Fixed costs

Card 3

Front

costs that changes with changes in output

Back

Preview of the back of card 3

Card 4

Front

total cost divided by output; also called unit cost

Back

Preview of the back of card 4

Card 5

Front

total fixed cost divided by output

Back

Preview of the back of card 5
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