Absolute advantage- The ability to produce the same good using fewer input than another
Production Possibilities Frontier- Shows all the combination of goods that a country can produce
given its p
Long run- is the time after all exit or entry has occurred.
Short run- is the period before exit or entry can occur.
Total revenue- is price times quantity sold: TR= PxQ.
Total cost- is the cost of
Surplus- a situation in which the quantity supplied is greater than the quantity demanded.
Shortage- a situation in which the quantity demanded is greater than the quantity supplied.
Equilibrium price- the pric
Market power-is the power to raise price above marginal cost without fear that other firms will
enter the market.
Monopoly-is a firm with market power.
Marginal revenue-is the change in total revenue
Private cost- is a cost paid by the consumer or the producer.
External cost- is a cost paid by people other than the consumer or the producer trading in the
Social cost- is the cost to ev
Chapter 1- The Big Ideas
Incentives- rewards and penalties that motivate behavior.
Opportunity cost- a choice is the value of the opportunities lost.
Inflation- is an increase in the general level of prices.
Elimination principle- above-normal profits are eliminated by entry and below-normal profits are
eliminated by exit.
Facts and tools
a. For profits to be higher in Industry H, the price in Industr
Protectionism- is the economic policy of restraining trade through quotas, tariffs, or other
regulations that burden foreign producers but not domestic producers.
Tariff- is a tax on imports.
Demand curve- is a function that shows the quantity demanded at different prices.
Quantity demanded- is the quantity that buyers are willing and able to buy at a particular
Price Discrimination- is selling the same product at different prices to different customers.
Arbitrage-is taking advantage of price differences for the same good in different markets by