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Module 9 Notes

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9 views2 pages

Module 9 Notes

Uploaded by

reeyanpeekaboo69
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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MR ZIRKLE VIDEOS

—---------------
Behind any product, there are many parts and processes where each person acts upon
their best interest. The price serves as a signal to help communicate information. Price is
a signal wrapped up in incentives. This is the invisible hand at action, self-interest
coordinated through goods in the market

Incentive - A reward that stimulates you take action

Marginal value - The lowest value satisfied demand or the highest value unsatisfied
demand or social opportunity cost

The great economic problem is how to arrange our limited resources to maximize as
many of our human wants as possible.

Economic profit = total revenues - total costs

Implicit costs - Opportunity costs of resources already owned by the firm


Explicit costs - Out-of-pocket money costs for a firm

Market structure - The conditions in an industry, such as numbers of sellers, how easy or
difficult it is to enter the industry, and the types of products sold

Monopoly - A situation in which one firm produces all the output in the market
Barriers to entry - The legal, technological, or market forces that discourage or prevent
potential competitors from entering the market

Oligopoly - When a few large firms have all or most of the sales in an industry
Cartels - A group of firms that collude to produce the monopoly output and sell at
monopoly price

Perfect competition - Each firm faces many competitors that sells identical products
Monopolistic competition - Many firms competing to sell similar but differentiated
products
—---------------
BOOK
—---------------

CHAPTER 7.1, 7.2

Production is not just about making a good, but also transportation, distribution, and
wholesale and retail sales. It is the process about transforming inputs into outputs, or
what the firm wants to sell.
Private enterprise - Private individual or group business ownership

Accounting profit - Total revenue - explicit costs


Economic profit - Total revenue - total costs

Types of factors of production:


● Natural Resources - Land and raw materials that come from nature
● Labor - Human effort
● Capital - Equipment built by humans to help
● Technology - Refers to the process or processes for producing the product
● Entrepreneurship - Decisions made by entrepreneur

Inputs can be described as fixed or variable


Fixed - Those that cannot be increased or decreased in a short amount of time
Variable - Those that can be increased or decreased in a short amount of time

CHAPTER 8.1
Perfect competition is reached when the following conditions occur:
1. Many firms produce identical products
2. There are many buyers and sellers for the product
3. Sellers and buyers can make rational decisions with all relevant info
4. There is free entry and exit into market for sellers

CHAPTER 9.1
Barriers to entry prevent potential competitors from entering the market.
Natural monopoly - When the economies of scale are large relative to the demand in the
market. High infrastructural costs compared to the demand of the market prevents others
from trying to enter

Control of a physical resource - Another monopoly can form if they have control over a
scarce physical resources

Legal monopolies - When government barriers or restrictions allow monopolies to form

Patents are exclusive rights for an inventor to sell a product for a limited time, to promote
innovation in science. Trademark is an identifying symbol for a good. Copyrights are
forms of protection to prevent anybody from displaying or distributing someone’s
literature or art without the author’s permission.
Trade secrets are secrets in which competing firms are not allowed to steal. These all
represent intellectual property, which is ownership over ideas and concepts not tangible
property.

Predatory pricing - When the firm uses the threat of a sharp price cut to discourage
competition, but in violation of US antitrust laws

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