Question

Match the term to the definition. There are NO DUPLICATES in this set.

A decision for the loss-minimizing producer to cease production but not go out of business

A group of firms that agree to coordinate their production and pricing decisions to maximize group profits

The condition that exists when market output is produced using the least-cost combination of inputs, given the level of technology.

To maximize profit or minimize loss, a firm should produce the quantity at which MR = MC

A legal barrier to entry that conveys to its holder the exclusive rights to sell a product for 20 years.

Important features of a market such as the number of firms, type of product, barriers to entry, etc.

An agreement among firms to increase economic profit by dividing the market or fixing the price.

Products produced within a market that are standardized.

Any impediment that prevents new firms from competing on an equal basis with existing firms in an industry.

The change in total cost resulting from a one-unit change in output.

The condition that exists when firms produce the output that is most preferred by consumers; marginal benefit equals marginal cost

A firm whose price is adopted by the rest of the industry.

A market situation in which there are only a few firms and each of them must consider the effect of their actions on their competitors’ behavior.

Increasing profit by selling a product for different prices to different groups of consumers when the price differences are not justified by differences in production costs.

The difference between the rate of output at a firm’s minimum average cost and the profit-maximizing rate of output

Vocabulary:

A.	Market structure
B.	Allocative efficiency
C.	Marginal cost
D.	Homogeneous product
E.	shutdown
F.	Excess capacity
G.	interdependence
H.	Golden rule of profit maximization
I.	Patent
J.	Price discrimination
K.	Productive efficiency
L.	Collusion
M.	cartel
N.	Barrier to entry
O.	Price leader

Answer 1

A.   

Market structure: Important features of a market such as the number of firms, type of product, barriers to entry, etc.

B.   

Allocative efficiency: The condition that exists when firms produce the output that is most preferred by consumers; marginal benefit equals marginal cost

C.   

Marginal cost: The change in total cost resulting from a one-unit change in output.

D.

Homogeneous product: Products produced within a market that are standardized.

E.   

Shutdown: A decision for the loss-minimizing producer to cease production but not go out of business

F.   

Excess capacity: The difference between the rate of output at a firm’s minimum average cost and the profit-maximizing rate of output

G.

Interdependence: A market situation in which there are only a few firms and each of them must consider the effect of their actions on their competitors’ behaviour.

H.

Golden rule of profit maximization: To maximize profit or minimize loss, a firm should produce the quantity at which MR = MC

I.

Patent: A legal barrier to entry that conveys to its holder the exclusive rights to sell a product for 20 years.

J.

Price discrimination: Increasing profit by selling a product for different prices to different groups of consumers when the price differences are not justified by differences in production costs.

K.   

Productive efficiency: The condition that exists when market output is produced using the least-cost combination of inputs, given the level of technology.

L.   

Collusion: An agreement among firms to increase economic profit by dividing the market or fixing the price.

M.   

Cartel: A group of firms that agree to coordinate their production and pricing decisions to maximize group profits

N.

Barrier to entry: Any impediment that prevents new firms from competing on an equal basis with existing firms in an industry.

O.

Price leader: A firm whose price is adopted by the rest of the industry.