Production, Cost, and the Perfect Competition Model

Marginal costs

Opportunity costs

Implicit costs

Explicit costs.

Economic profit is negative

Economic profit is positive

Implicit costs are lower than explicit costs

Implicit costs are higher than explicit costs

Perfect competition.

Utility maximization.

Demand elasticity.

Scarcity.

Every worker receives employment but possibly fewer hours resulting in stable unemployment levels.

Unemployment decreases because workers are more motivated with higher wages.

Unemployment increases as there’s excess supply of labor not met with sufficient demand at this imposed wage rate.

The overall effect on unemployment is neutral since demand for labor will increase proportionally with its cost.

The income they would have earned while working full-time.

Skills developed during either educational pursuits or professional work experience.

Tuition fees and expenses paid for attending college.

Experiences gained through higher education that are not available in the workforce.

Accounting profit assesses overall firm health, whereas economic profit considers market saturation.

Economic profit includes only tangible revenues while accounting profit also includes intangible benefits.

Economic profit factors in opportunity costs while accounting profit does not.

Accounting profit is higher than economic profit due to taxes.

Perfect competition

Oligopoly

Monopoly

Monopolistic competition

Decrease production until marginal cost equals marginal revenue.

Increase production to produce at minimum average variable cost.

Shut down immediately to minimize losses.

Continue producing at that level because it's earning an economic profit.

Total utility

Average utility

Marginal utility

Consumer surplus

Video game manufacturers lower console prices after overproduction.

The number of video game console suppliers increases significantly due to low entry barriers.

New legislation introduces a tax credit on entertainment electronics purchases.

Reports emerge that frequent gaming can have negative health effects.