Download Key Terms and Concepts: Chapter 7 Average Revenue Total

Key Terms and Concepts: Chapter 7
Average Revenue
Total Revenue divided by Quantity sold. When all sales are at a
single price, average revenue equals price.
Break-Even Price
The price at which total revenue equals total cost (economic cost).
Price equals Average Cost.
Constant Cost
Industry
An industry whose long-run supply curve is horizontal.
Consumers' Surplus
The difference between the maximum consumers are willing to pay
for a given amount of a good or service and the amount they do pay
per period.
Decreasing Cost
Industry
An industry whose long-run supply curve is downward sloping.
Economic Capacity
Operation of a firm or plant at the scale such that average cost is
minimized.
Excludable Product
A good whose characteristic is such that the right to the good is
clearly defined and others can easily be excluded from its use.
External Economy
Firm costs are inversely related to the size of the industry's output.
External Diseconomy
Firm costs are directly related to the size of the industry's output.
Identical Products
Products such that in the eyes of the consumer they are the same,
even if they are sold by different vendors.
Imperfect
Competition
Market structures other than perfect competition.
Increasing Cost
Industry
An industry whose long-run supply curve is upward sloping.
Long-run Market
Supply
A curve showing the relationship between price and the output that
all sellers, existing and potential, will supply after all long-run
adjustments are made. Profits are zero along the LRS.
Marginal Revenue
The change in Total Revenue divided by the change in Quantity sold.
In perfect competition, marginal revenue equals price.
Market Power
The ability of the buyer or seller to manipulate the terms of trade,
usually price, to their advantage.
Market Structure
A classification system for the key traits of a market including the
number of buyers and sellers, the type of product bought and sold, and
the ease of entry or exit into and from the market.
Monopoly
A market with only one seller.
Perceived Demand
The demand as seen by the seller.
Perfect Competition
A market in which all goods are perfect substitutes, there are no
barriers to entry or exit, buyers and sellers are price takers, and have
enough information to make informed decisions.
Price Searcher
A buyer or seller who can affect the market price by their decision to
buy or sell.
Price Taker
A buyer or seller with no influence over the market price.
Producers' Surplus
The difference between the minimum sellers must have in
compensation for a given amount of a good or service and the amount
they do receive per period.
Profit Maximization
Rule
Profits are maximized at a positive rate of output when marginal
revenue equals marginal cost.
Quantity Adjuster
A buyer or seller who is a price taker can only decide how much to
buy or sell per period.
Rent Seeking
Behavior
The nonproductive use of resources by buyers or sellers with market
power to preserve that power.
Rival Products
A good whose characteristic is such that the use or consumption of
the good precludes others from using or consuming the good.
Shut Down Price
The price, in the short-run, below which it is less costly for the seller
to exit rather than remain in the market. Price equals average variable
cost.
Social Surplus
The surplus that accrues to society due to a given level of an activity
or transaction. When there is no divergence between private and social
benefits and costs, social surplus is the sum of consumer and producer
surplus.
Short-run Market
Supply
The horizontal summation of all firms' short-run supply curves.
Total Revenue
Price times Quantity sold