| Terms |
Definitions |
|
MRP
|
marginal resource price
|
|
AFC
|
average fixed cost
|
|
MB
|
marginal benefit abbreviation
|
|
ATC
|
average total cost
|
|
utility
|
Happiness, or benefit, or satisfaction, or enjoyment gained from consumption of goods & services
|
|
explicit costs
|
Direct, purchased out-of-pocket costs, paid to resource suppliers outside the firm. Also referred to as accounting costs
|
|
average total cost
|
Total cost divided by output
|
|
disequilibrium
|
Any price where the quantity demanded doesn't = quantity supplied
|
|
total utility
|
The total happiness received from consumption of a # of units of a good
|
|
cartel
|
Firms that agree to maximize their joint profits rather than compete
|
|
marginal analysis
|
Making decisions based upon weighing the marginal benefits & costs of that action. The rational decision-maker chooses an action if the MB ≥ MC
|
|
necessity
|
A good for which the proportional increase in consumption is less than the proportional increase in income
|
|
Surplus
|
a situation in which quantity supplied is greater than quantity demanded
(SUPPLIES>DEMANDS)
|
|
bond
|
a legally binding promise to repay borrowed funds with interest at a specified future date.
|
|
allocative efficiency
|
involves choosing the most valuable mix of outputs to produce
|
|
monopolistic competition
|
A market structure characterized by a few small firms producing a differentiated product w/ easy entry into the market
|
|
least-cost rule
|
The combination of labor & capital that minimizes total costs for a given production rate is where MPL / PL = MPK / PK
|
|
monopoly
|
A market structure in which one firm is the sole producer of a good w/ no close substitutes in a market w/ entry barriers
|
|
economic profit
|
The difference b/w total revenue & total economic cost
|
|
PPF
|
The graphical device used to show the production possibilities of two goods (use abbreviation)
|
|
Average Variable Cost
|
Total variable cost divided by output
|
|
productivity
|
The quantity of output that can be produced per worker in a given amount of time
|
|
demand schedule
|
A table showing quantity demanded for a good at all prices
|
|
Supply Schedule
|
a table that shows the relationship between the price of a good and the quantity supplied
|
|
Supply Curve
|
a graph of the relationship between the price of a good and the quantity supplied (ALWAYS slopes upward)
|
|
collective bargaining
|
negotiations between an employer and a labor union
|
|
complements
|
goods and services that go well with each other, such as cream with coffee
|
|
barriers to entry
|
when investors or entrepreneurs find obstacles to joining a profitable industry.
|
|
free-rider problem
|
The lack of private funding for a public good due to the presence of free riders
|
|
progressive tax
|
A tax where the proportion of income paid in taxes rises as income rises
|
|
utility maximizing rule
|
The consumer chooses amounts of goods X & Y, w/ their limited income, so that the marginal utility per dollar spent = for both goods
|
|
price discrimination
|
The sale of the same product to different groups of consumers at different prices
|
|
demand for labor
|
shows quantity of labor demanded at all wages. Labor demand for a firm hiring in a competitive labor market is MRPL
|
|
sticky prices
|
THe case when price levels do not change, especially downward w/ changes in AD
|
|
lorenz curve
|
A graphical device that shows how a nation's income is distributed across the nation's households
|
|
human capital
|
The amount of knowledge & skills that labor can apply to the work that they do
|
|
perfectly inelastic
|
In this special case, the demand curve is vertical & there is absolutely no response to a ∆ in P
|
|
normal profit
|
profit when firm is earning 0 economic profit
|
|
Law of Supply
|
the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises
|
|
compensating wage differentials
|
additional pay offered by employers to offset undesirable job characteristics
|
|
black market
|
market in which goods are bought and sold illegally; associated with price controlls.
|
|
circular flow
|
a model of the economy that depicts how the flow of money facilitates a counterflow of resources, goods, and services in the input and output markets.
|
|
constant returns to scale
|
the horizontal range of long-run ATC where LRAC is constant over a variety of plant sizes
|
|
Quantity Supplied
|
the amount of a good that sellers are willing and able to sell
|
|
marginal product of labor
|
∆ in total product resulting from a ∆ in labor input
|
