Definitions hide and write on Marginal Analysis
Word / Term
Diminishing
marginal utility
Marginal
utility
Your definition
Correct definition
As additional units are
consumed total utility
increases at a decreasing
rate. Consumers get less
and less satisfaction.
The extra satisfaction
gained from consuming
additional units
Monopoly
The only seller in the
market
Economic
costs
The actual costs and the
opportunity costs of
running a business
Accounting
Costs
Fixed costs
The actual costs of running
a business
Costs that do not change as
output changes e.g.
insurance.
Economies of
scale
As more of one factor is
used with a fixed amount
of some other factor the
output will rise but by less
and less each time.
As the size of the firm
increases the average cost
of production decreases
Diseconomies
of scale
As the size of the firm
increases the average cost
of production increases.
Diminishing
returns
Breakeven
point
Shutdown
point
The price at which revenue
covers all economic costs
The price at which revenue
covers you variable costs.
Word / Term
Supernormal
profit
Normal profit
Subnormal
profit
Optimum
purchase rule
Equi marginal
rule
Price taker
Scarcity
Your definition
Correct definition
A profit more than that
required to keep the firm
in its present activity
A profit just enough to
keep the firm in its present
activity
A level of profit that is not
enough to keep the firm in
its present activity
Consumers who want to
maximise utility should
purchase more of both
goods until P = MU
Consumer equilibrium is
reached when all income is
spent and MU divided by
price is = for two goods
The firm has no control
over the price and must
accept the market price
Where there are not
enough resources to satisfy
our unlimited wants
Duopoly
Only two sellers in the
market
Monopsony
Only one buyer in the
market
Type of competition where
Perfect
the participants have no
competition
control over the price and
are price takers
Firms compete with each
Non price
other buy trying to make
competition
their products better or
appear better.
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