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Econ > Econ Midterm 2 Chap. 6-10 > Flashcards

Econ Midterm 2 Chap. 6-10 Flashcards

1
Q

Accounting Profit

A

Calculated by subtracting the explicit costs from the total revenue

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2
Q

Diminishing Marginal Product

A

Occurs when successive inputs are associated with a slower rise in output

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3
Q

Economic profit

A

Calculated by subtracting both the explicit costs and implicit costs of doing business from total revenue

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4
Q

Explicit Costs

A

Tangible out of pocket expenses

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5
Q

Factors of production

A

The inputs (labor, land, and capital) used in producing goods and services

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6
Q

Fixed costs

A

Unavoidable; do not very with output in the short run.

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7
Q

Fixed inputs

A

Inputs that cannot be changed in the short run

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8
Q

Implicit Costs

A

Opportunity costs of using resources already owned for one purpose rather than another

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9
Q

Loss

A

When total revenue is less than total cost

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10
Q

Marginal Cost

A

The increase in cost that occurs from producing one additional unit of output

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11
Q

Marginal Product

A

The change in output associated with one additional unit of input

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12
Q

Marginal Revenue

A

The additional revenue generated by the production and sale of one more unit of output

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13
Q

Output

A

The good or service a firm produces

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14
Q

Production Function

A

Describes the relationship between inputs and outputs

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15
Q

Profit

A

Results when total revenue is higher than total cost

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16
Q

The profit-maximizing rule

A

States that profit maximization occurs when the firm chooses the quantity causes marginal revenue to equal marginal cost (MR=MC)

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17
Q

Total Cost

A

The amount a firm spends to sell/produce a good or service

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18
Q

Total output

A

The sum of the individual worker’s marginal products

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19
Q

Total Revenue

A

The amount a firm receives from the sale of goods or services

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20
Q

Variable Costs

A

Costs that change with the rate of output

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21
Q

Variable Inputs

A

Inputs that can be changed quickly to increase or decrease output levels.

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22
Q

Average Total Cost

A

The total cost of producing a particular amount of output, divided by the amount of output

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23
Q

Barriers to entry

A

restrictions that make it difficult for new firms to enter the market

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24
Q

Competitive Market

A

Exists when there are so many buyers and sellers that each has only a small (negligible) on the market price and output

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25
Q

Market Power

A

Refers to a firms ability to influence the price of a good or service

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26
Q

Market Structure

A

Refers to the way firms in a particular market are interconnected

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27
Q

Price Taker

A

Has no control over the price set by the market. It “takes” (accepts) the price determined from the overall supply and demand conditions that regulate the market

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28
Q

Signals

A

Convey information about the profitability of a market

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29
Q

Deadweight Loss

A

The decrease in economic activity caused by market distortions. It occurs when there are fewer trades than would optimally occur, resulting in a reduction of the combined consumer and producer surplus

30
Q

Market failure

A

Occurs when markets produce a result that is inefficient in societies point of view

31
Q

Monopolistic competition

A

A type of market structure characterized by low barriers to entry, many firms, and product differentiation

32
Q

Monopoly

A

Occurs when a single seller supplies the entire market for a good or service

33
Q

Monopoly Power

A

A measure of a monopolist’s power ability to set a price of a good or service

34
Q

Natural Monopoly

A

Occurs when a single large firm has lower costs than any potential small seller

35
Q

Oligopoly

A

Exists when a number of firms is small and there is high barriers to entry

36
Q

Price maker

A

Has some control over the price it charges

37
Q

product differentiation

A

the process firms use to make a product more attractive to potential costumers

38
Q

Rent seeking

A

Occurs when resources are used to secure monopoly rights through the political process

39
Q

Compensating Differential

A

The difference in wages offered to offset the desirability or undesirability of a job

40
Q

Derived Demand

A

The demand for an input used in the production process

41
Q

Efficiency Wages

A

Wages higher than equilibrium wages, offered to increase worker productivity

42
Q

Human capital

A

The set of skills workers acquire on the job and through education

43
Q

Marginal Product of labor

A

The change in output associated with adding one addition worker

44
Q

Monospony

A

A situation in which there is only one buyer

45
Q

Outsourcing of labor

A

Occurs when a firm shifts jobs to an outside company, usually overseas, where the cost of labor is lower

46
Q

Productivity

A

The effectiveness of effort as measured by in terms of rate of output per unit of input

47
Q

Strike

A

A work stoppage designed to aid a union’s bargaining position

48
Q

Union

A

A group of workers who bargain collectively for better wages and benefits

49
Q

value of the marginal product

A

the marginal product of an input multiplied by the price of the output it produces

50
Q

Cap and trade

A

an approach used to curb pollution by creating a system of emissions permits that are traded in an open market

51
Q

club good

A

Has two characteristics: it is nonrival in consumption and excludable

52
Q

common-resource good

A

has two characteristics: it is both rival in consumption and nonexcludable

53
Q

cost-benefit analysis

A

a process that economists use to determine whether the benefits of providing a public good outweigh the costs

54
Q

excludable good

A

a good that access can be limited to paying customers

55
Q

external costs

A

The costs of a market activity imposed on people who are not participants in that market

56
Q

externalities

A

costs or benefits of market activity that affect a third party

57
Q

free-rider problem

A

occurs whenever someone receives a benefit without having to pay for it

58
Q

government failure

A

occurs when government intervention makes a problem worse

59
Q

Internal costs

A

are the costs of market activity paid only by an individual participant

60
Q

internalize

A

An externality when they take into account the external costs (or benefits) to society as a result of their actions

61
Q

Market failure

A

occurs when there is an insufficient allocation of resources in a market

62
Q

private good

A

has two characteristics: it is both excludable and rival in consumption

63
Q

private property

A

provides an exclusive right of ownership that allows for the use, and especially the exchange, of property

64
Q

property rights

A

give the owner the ability to exercise control over a resource

65
Q

public good

A

Can be jointly consumed by more than one person, and from which nonpayers are difficult to exclude

66
Q

rival good

A

a good that cannot be enjoyed by more than one person at a time

67
Q

social costs

A

are the sum of the eternal costs and external costs of a market activity

68
Q

social optimum

A

is the price and quantity combination that would exist if there were no externalities

69
Q

third-party problem

A

occurs when those not directly involved in a market activity experience harm or benefit from it

70
Q

tragedy of the commons

A

occurs when a good that is rival in consumption but non-excludable becomes depleted

Econ (2 decks)

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