Cost Theory

Theory of Contestable Markets
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Theory of Contestable Markets

The Theory of Contestable Markets occurs when barriers to entry into the market are weak or low or in some cases non-existent. The theory assumes that all entrants have equal access to technology so there is a constant threat of potential entry, which increases competition in the market. Such a market is called a contestable market. Thus,...
Economic Profit
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Economic Profit

In Economics, Economic profit is different from general business term 'profit'. The general assumption is that firms are producing goods to maximize profits. However, economists also assume that firms may aim to maximize revenue (profit is revenue - cost), maximize market share or achieve a pre-defined level of profit. What is Economic Profit? The economic profits...
Barriers to Entry
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Barriers to Entry

In Economics, Barriers to Entry are design to prevent potential competitors from entering the market. Some barriers to entry are placed by the government, while others could be related to cost. This results in different market structures such as monopolies or oligopolies (a few firms). Telecommunications and international logistics are the two industries with the...
Perfect Competition Rise in Demand
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Perfect Competition Rise in Demand

Perfect Competition or Pure Competition (PC) is a type of market structure, which doesn’t exist and is considered to be theoretical. There are very many small firms that produce the identical product. They sell whatever they can produce and no single firm has an effect on the market price. In the long run, with the entry...
Economies of Scale
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Economies of Scale

In Economics, Economies of Scale are a fall in the long run average costs because of an increased scale of production. The most significant advantage of achieving economies of scale is a reduced cost per unit of production. Internal Economies of Scale Internal economies of scale cut costs within the firm. Examples of Internal Economies of Scale...
non-durable goods
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Durable & Non-Durable Goods

Durable goods are those goods that don't wear out quickly and last over a long period of time. Examples of durable goods include land, cars and appliances. While non-durable goods or soft goods are those goods that have a short life cycle. They are generally used up all at once or have a lifespan of less than three...

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