firm
institution that hires factors of production and organizes them to produce goods and services
explicit costs
costs paid directly in money
implicit costs
costs incurred when firm uses its own capital or its owners' time for which it does not make a direct money payment
economic efficiency
occurs when firm produces given level of output at the least cost
technological efficiency
occurs when a firm produces a given level of output by using the least amount of inputs
total product
total output produced in a given period
marginal product of labour
change in total product (from 1-unit increase in qty of labour employed)
average product of labour
(total product/qty of labour)
production function
relationship between max output attainable and qty of both capital & labour
marginal product of capital
increase in output resulting from a one-unit increase in the amount of capital employed (amount of labour employed remains constant)
long run average cost curve
relationship between lowest attainable average total cost and output (when both plant size and labour are varied)
economies of scale
features of firm's technology that lead to falling long-run average cost as output increase
diseconomies of scale
features of firm's technology that lead to rising long-run average cost as output increases
constant returns to scale
features of firm's technology that lead to constant long-run average cost as output increases
minimum efficient scale
smallest qty of output at which long-run average cost reaches its lowest level (if long run avg cost curve is U-shaped, min point identifies min efficient scale output level)
price taker
firm that cannot influence price of good or service (must take equilibrium market price)
marginal revenue
change in total revenue that results from a one-unit increase in the quantity sold
shutdown point
output and price at which the firm just covers its total variable cost
market power
ability to influence market, and in particular the market price, by influencing the total qty offered for sale
single-price monopoly
sells each unit of output for same price to all customers
price discrimination
selling different units of a good/service for different prices
rent seeking
any attempt to capture consumer/producer surplus, or economic profit
collusive agreement
agreement between two or more firms to restrict output, raise price, and increase profits
contestable market
market in which firms can enter and leave so easily that firms in the market face competition from potential entrants