Modules 20, 21, 22, 23 - Custom Scholars
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# Modules 20, 21, 22, 23

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Production Function
the relationship between the quantity of inputs a firm uses and the quantity of output it produces
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Fixed Input
an input whose quantity is fixed for a period of time and cannot be varied
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Variable Input
an input whose quantity the firm can vary at any given time
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Long Run
the time period in which all inputs can be varied
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Short Run
the time period in which at least one input is fixed
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Total Product Curve
shoes how the quantity of output depends on the quantity of the variable input, for a given quantity of the fixed input
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Marginal Product
the additional quantity of output that is produced by using one more unit of that input
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Diminishing Returns to an Input
when an increase in the quantity of an input, holding the levels of all other inputs fixed, leads to a decline in the marginal product of that input
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Fixed Cost
a cost that does not depends on the quantity of output produced (the cost of a fixed input)
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Variable Cost
a cost that depends on the quantity of output produced (the cost of the variable input)
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Total Cost
cost of producing a given output is the sum of the fixed cost and the variable cost of producing that quantity of output
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Total Cost Curve
Shows how total cost depends on the quantity of output
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Average Total Cost
total cost divided by quantity of output produced
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U-Shaped Average Total Cost Curve
a curve that falls at low levels of output, then rises at higher levels
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Average Fixed Cost
the fixed cost per unit of output
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Average Variable Cost
the variable cost per unit of output
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Minimum-Cost Output
the quantity of output at which average total cost is lowest (bottom of the U-shaped average curve)
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Long-Run Average Total Cost Curve
shows the relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output
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Increasing Returns to Scale
when long-run average total cost declines as output increases
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Decreasing Returns to Scale
when long-run average total cost increases as output increases
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Constant Returns to Scale
when long-run average total cost is constant as output increases
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Price-Taking Producer
a producer whose actions have no effect on the market price of the good or service it sells
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Price-Taking Consumer
a consumer whose actions have no effect on the market price of the good or service he or she buys
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Perfectly Competitive Market
a market in which all market participants are price-takers
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Perfectly Competitive Industry
an industry in which producers are price-takers
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Market Share
the fraction of the total industry output accounted for by that producer's output
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Standardized Product (Commodity)
when consumers regard the products of different producers as the same good
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Free Entry and Exit
when new producers can easily enter into an industry and existing producers can easily leave that industry
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Monopolist
the only producer of a good that has no cost substitutes
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Monopoly
industry that is controlled by a monopolist
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Market Power
the ability of a firm to raise prices
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Barrier to Entry
something that monopolist must have; to prevent other firms from entering the industry
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Natural Monopoly
when economies of scale provide a large cost advantage to a single firm that produces all of an industry's output
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Network Externality
when the value of a good or service to an individual is greater when many other people use the same good or service
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Patent
gives the inventor a temporary monopoly in the use or sale of an invention
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gives the creator of a literary of artistic work the sole right to profit from that work
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Oligopoly
an industry with only a small number of firms
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Oligopolist
a producer in an oligopoly
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Imperfect Competition
when no one firm has a monopoly, but producers nonetheless realize that they can affect market prices
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Collusion
when sellers cooperate to raise their joint profits
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Herfindal-Hirschman Index (HHI)
the square of each firm's share of market sales summed over the industry. Giving a picture of the industry market structure
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Monopolistic Competition
a market structure in which there are many competing firms in an industry, each firm sells a differentiated product, and there is free entry into and exit from the industry in the long run
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question
Production Function
the relationship between the quantity of inputs a firm uses and the quantity of output it produces
question
Fixed Input
an input whose quantity is fixed for a period of time and cannot be varied
question
Variable Input
an input whose quantity the firm can vary at any given time
question
Long Run
the time period in which all inputs can be varied
question
Short Run
the time period in which at least one input is fixed
question
Total Product Curve
shoes how the quantity of output depends on the quantity of the variable input, for a given quantity of the fixed input
question
Marginal Product
the additional quantity of output that is produced by using one more unit of that input
question
Diminishing Returns to an Input
when an increase in the quantity of an input, holding the levels of all other inputs fixed, leads to a decline in the marginal product of that input
question
Fixed Cost
a cost that does not depends on the quantity of output produced (the cost of a fixed input)
question
Variable Cost
a cost that depends on the quantity of output produced (the cost of the variable input)
question
Total Cost
cost of producing a given output is the sum of the fixed cost and the variable cost of producing that quantity of output
question
Total Cost Curve
Shows how total cost depends on the quantity of output
question
Average Total Cost
total cost divided by quantity of output produced
question
U-Shaped Average Total Cost Curve
a curve that falls at low levels of output, then rises at higher levels
question
Average Fixed Cost
the fixed cost per unit of output
question
Average Variable Cost
the variable cost per unit of output
question
Minimum-Cost Output
the quantity of output at which average total cost is lowest (bottom of the U-shaped average curve)
question
Long-Run Average Total Cost Curve
shows the relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output
question
Increasing Returns to Scale
when long-run average total cost declines as output increases
question
Decreasing Returns to Scale
when long-run average total cost increases as output increases
question
Constant Returns to Scale
when long-run average total cost is constant as output increases
question
Price-Taking Producer
a producer whose actions have no effect on the market price of the good or service it sells
question
Price-Taking Consumer
a consumer whose actions have no effect on the market price of the good or service he or she buys
question
Perfectly Competitive Market
a market in which all market participants are price-takers
question
Perfectly Competitive Industry
an industry in which producers are price-takers
question
Market Share
the fraction of the total industry output accounted for by that producer's output
question
Standardized Product (Commodity)
when consumers regard the products of different producers as the same good
question
Free Entry and Exit
when new producers can easily enter into an industry and existing producers can easily leave that industry
question
Monopolist
the only producer of a good that has no cost substitutes
question
Monopoly
industry that is controlled by a monopolist
question
Market Power
the ability of a firm to raise prices
question
Barrier to Entry
something that monopolist must have; to prevent other firms from entering the industry
question
Natural Monopoly
when economies of scale provide a large cost advantage to a single firm that produces all of an industry's output
question
Network Externality
when the value of a good or service to an individual is greater when many other people use the same good or service
question
Patent
gives the inventor a temporary monopoly in the use or sale of an invention
question
gives the creator of a literary of artistic work the sole right to profit from that work
question
Oligopoly
an industry with only a small number of firms
question
Oligopolist
a producer in an oligopoly
question
Imperfect Competition
when no one firm has a monopoly, but producers nonetheless realize that they can affect market prices
question
Collusion
when sellers cooperate to raise their joint profits
question
Herfindal-Hirschman Index (HHI)
the square of each firm's share of market sales summed over the industry. Giving a picture of the industry market structure
question
Monopolistic Competition
a market structure in which there are many competing firms in an industry, each firm sells a differentiated product, and there is free entry into and exit from the industry in the long run

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