A level Year 2 Microeconomics

Any profit made above normal profit causing new firms to enter the market (AR>AC)

Focusses on the change in choice and quantity over time; linked with innovation (Eff)

Total revenue - Total cost

Costs that are dependant on output

A large number of small suppliers producing non-homogenous goods so have some price setting power (MS)

A formal agreement - when firms agree to fix prices and quantity (illegal in EU, UK and US) (Collusion)

Informal agreement - firms monitor one another and copy each others actions (Collusion)

The market share of the largest firms in the industry

Fixed cost + Variable cost

When organisational wastage leads to a loss of efficiency (Eff)

In perfect competition, when price = AVC

A small number of large firms produce most of the output of an industry (MS)

When AR < AC causing firms to leave the market

Costs of production which are not recoverable if a firm leaves the market

Costs that do not change with output

The characteristics of a market which determine the behaviour of firms

Lead to a rise in a firms long-run average costs

Producing at the lowest possible cost of production (MC=AC) (Eff)

When an economy is allocating scarce resources to meet society's wants and needs (P=MC) (Eff)

Total revenue - Total cost - Opportunity cost

In highly contestable markets, firms enter and leave in order to make short term supernormal profits

Occurs when a whole industry grows larger and firms benefit from lower long-run average costs (EoS)

Secret or illegal cooperation in order to deceive other firms / achieve a common goal

How easy it is for new firms to enter an industry/market

A large number of small suppliers, none of which is large enough to dominate the market (MS)

Unit cost advantages from expanding the scale of production in the long-run

When there is a wide-ranging agreement among several firms in a market