What's it: Fixed costs are types of costs whose value is unaffected by changes in the amount of output. When a firm increases output or decreases output, it does not change.For example, the factory machine's rental cost is $15,000,000 for 1 year.
Microeconomics
Marginal Product: Meaning, How To Calculate It
What's it: Marginal product refers to the additional output produced when a firm uses one additional input unit, assuming the other inputs are constant. Another term for the marginal product is a marginal return or marginal productivity.How to
Economic Profit: Meaning, Formula, and Key Factors
What's it: Economic profit is the difference between revenue and total costs (implicit costs plus explicit costs). This is another measure of profit besides accounting profit. Implicit costs represent opportunity costs when a firm chooses to use a
Nash Equilibrium: Meaning, Concept and Examples
What's it: Nash equilibrium is a game theory concept that determines the optimal solution in non-cooperative competition in which each player has no incentive to change their initial strategy. John Nash, an American mathematician, put it in
Collusion: Meaning, Influencing Factors, Types, Pros and Cons
What's it: Collusion is tacit cooperation or agreement to deceive others and achieve mutual benefits for the parties involved. Such agreements exist to avoid direct competition, reduce market uncertainty, and achieve higher profits. Collusion is
Economies of Scale: Types, Benefits, How to Achieve It
What it is: Economies of scale are the cost savings when a company increases its production scale. An increase in output allows the firm to reap a decreasing average cost of production. Production becomes more efficient because the firm can
Labor Productivity: Key Drivers and Economic Impact
Labor productivity is a critical metric that measures how efficiently an economy, business, or industry produces goods and services. In simpler terms, it reflects the amount of output (goods or services produced) generated per unit of labor input
Monopoly Power: Meaning, Sources, and Effects
What's it: Monopoly power refers to a firm's ability to influence market prices. It is weak when the market is made up of many players, and products are relatively homogeneous. Market power is higher when firms operate under an oligopoly, where the
Market Failure: Types, Effects, and Solutions
What's it: Market failure refers to a condition in which the market mechanism doesn't work, thus creating inefficiency in the market. Demand, supply, and price aren't in equilibrium. As a result, markets fail to allocate economic resources most
Externalities: Meaning, Types, and Solutions
What's it: Externalities are costs or benefits of economic activities borne by third parties who are not involved in it. They are not reflected in the final cost or benefit of the goods or services produced.Economists view externalities as
Cartel: Goals, Examples, Characteristics, Effects, and Reasons for Failure
What's it: A cartel is a formal agreement between several parties to increase economic benefits. It can appear on both the market demand and supply sides, although the latter is more common.Cartel objectivesA cartel is a form of
Cournot Model: Concept, Assumption, Solution, and Criticism
What's it: A Cournot model is one of the economic models to explain the oligopoly market. This model assumes that the firm independently decides the profit-maximizing level of production. I mean, they don't depend on how many competitors are