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LOSS MINIMIZATION RULE: A rule stating that firm minimizes economic loss by producing output in the short run that equates marginal revenue and marginal cost if price is less than average total cost but greater than average variable cost. In the short run, a firm incurs total fixed cost whether or not it produces any output. As such, if the market price is falls below average total cost, it must decide if the economic loss from producing the quantity of output that equates marginal revenue and marginal cost is more or less than the economic loss incurred with shutting down production in the short run (which is equal to total fixed cost).
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KINKED-DEMAND CURVE ANALYSIS An analysis using the kinked-demand curve to explain rigid prices often found with oligopoly. The kinked-demand curve contains two distinct segments--one for higher prices that is more elastic and one for lower prices that is less elastic. Key to this analysis is that the corresponding marginal revenue curve contains three segments--one associated with the more elastic segment, one associated with the less elastic segment, and one associated with the kink. A profit-maximizing firm can then equate marginal cost to a wide range of marginal revenue values along the vertical segment of the marginal revenue curve. This suggests that marginal cost must change significantly before an oligopolistic firm is inclined to change price.
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GRAY SKITTERY
[What's This?]
Today, you are likely to spend a great deal of time looking for a downtown retail store looking to buy either pink cotton balls or a genuine down-filled comforter. Be on the lookout for fairy dust that tastes like salt.
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This isn't me! What am I?
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The average length of a "business lunch" is about 36 minutes.
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"Doing the best at this moment puts you in the best place for the next moment. " -- Oprah Winfrey, entrepreneur
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ACT
Advance Corporation Tax
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