Economics - Unit 3 Flashcards
(54 cards)
Shirking
The behavior of a worker who is putting forth less than the agreed-to effort.
Business firm
An organization that uses resources to produce goods and services that are sold to consumers, other firms, or the government.
Sole proprietorship
A business that is owned by one individual who makes all business decisions, receives all the profits or incurs all the losses of the firm, and is legally responsible for the debts of the firm
Partnership
A business owned by two or more owners, called partners, who share profits and are legally responsible for debts
Corporation
A legal entity that can conduct business in its own name in the same way that an individual does.
Stockholder
A person who owns shares of stock in a corporation
Asset
Anything of value to which the firm has a legal claim
Limited liability
A condition in which an owner of a business firm can lose only the amount he or she has invested (in the firm)
Board of directors
An important decision making body in a corporation. It decides corporate policies and goals, among other things.
Dividends
Shares of the corporation profits distributed to stockholders
Bonds
Statement of debt issued by a corporation
Franchise
A contract by which a firm (usually a corporation) lets a person or group use its name and sell its goods in exchange for certain payments and requirements.
Franchiser
The entity that offers a franchise
Franchisee
The person or group that buys a franchise
Fixed cost
A coat, or expense, that is the same no matter how many units of a good are produced
Variable cost
A cost, or expense, that changes with the number of units of a good produced
Total cost
The sum of fixed costs plus variable costs
Average total cost
The total cost divided by the quantity of output
Marginal cost
The cost of producing an addition unit of a good; the change in total cost that results from producing an addition unit of output
Marginal revenue
The revenue from selling an additional unit of a good; the Change in total revenue that results from selling an additional unit of output
Law of diminishing marginal returns
A law that states that if additional units of one resource are added to another resource in fixed supply, eventually the additional output will decrease
Why does a business need a boss?
To efficiently coordinate and direct the activities of others in the organization
Law of diminishing marginal productivity
If a factor of production is adddd to another factor of production in fixed supply eventually total output will peak and thereafter decrease
Advantages (2) and disadvantages (2) of sole proprietorships
Advantages:
- all profits belong to one person
- complete control of the enterprise
Disadvantages:
- all responsibility to manage business
- unlimited liability
