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INCREASING RETURNS TO SCALE: A given proportionate increase in all resources in the long run results in a proportionately greater increase in production. Increasing returns to scale exists if a firm increases ALL resources -- labor, capital, and other inputs -- by 10%, and output increases by more than 10%. You might want to compare decreasing returns to scale and constant returns to scale.
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Lesson 16: Perfect Competition | Unit 1: Price Taker
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Page: 3 of 28
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- Each firm in a perfectly competitive market has no market control and is a price taker.
- A price taker is a firm that takes, or accepts, the going market price and has no ability to control it or to charge a different price.
- Because a perfectly competitive firm is such a small part of the overall market, it has no choice but to sell output at the going market price:
- There is no WAY to sell output ABOVE the going market price.
- There's no REASON to sell output BELOW the going market price.
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DIAMOND-WATER PARADOX The apparently conflicting and perplexing observation that water, which is more useful than diamonds, has a lower price than diamonds. This paradox was proposed by economists in the 1800s as a means understanding the role utility plays in the demand price of a good by differentiating between total utility and marginal utility.
Complete Entry | Visit the WEB*pedia |
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The earliest known use of paper currency was about 1270 in China during the rule of Kubla Khan.
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"We succeed in enterprises (that) demand the positive qualities we possess, but we excel in those (that) can also make use of our defects." -- Alexis de Tocqueville, Statesman
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