Second exam

Question 1

the amount a firm receives for the sale of its output

Answer 1

total revenue

Question 2

the market value of the inputs a firm uses in production

Answer 2

total cost

Question 3

total revenue - total cost

Answer 3

profit

Question 4

input costs that require an outlay of money by the firm

Answer 4

explicit cost

Question 5

input costs that do not require an outlay of money by the firm

Answer 5

implicit cost

Question 6

total revenue minus total cost, including both explicit and implicit costs

Answer 6

economic profit

Question 7

total revenue - total explicit cost

Answer 7

accounting profit

Question 8

the relationship between quantity of inputs used to make a good and the quantity of output of that good

Answer 8

production function

Question 9

the increase in output that arises from an additional unit of input

Answer 9

marginal product

Question 10

the property whereby the marginal product of an output declines as the quantity of the input increases

Answer 10

diminishing marginal product

Question 11

costs that do not vary with the quantity of output produced

Answer 11

fixed costs

Question 12

costs that vary with the quantity of output produced

Answer 12

variable costs

Question 13

total cost divided by the quantity of output

Answer 13

average total cost

Question 14

fixed cost divided by the quantity of output

Answer 14

average fix cost

Question 15

variable cost divided by the quantity of output

Answer 15

average variable cost

Question 16

the increase in total cost that arises from an extra unit of production

Answer 16

marginal cost

Question 17

the quantity of output that minimizes average total cost

Answer 17

efficient scale

Question 18

the property whereby long-run average total cost falls as the quantity of output increases

Answer 18

economies of scale

Question 19

he property whereby long-run average total cost rises as the quantity of output increases

Answer 19

diseconomies of scale

Question 20

the property whereby long-run average total cost stays the same as the quantity of output changes

Answer 20

constant returns to scale

Question 21

a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker

Answer 21

competitive market

Question 22

total revenue divided by the quantity sold

Answer 22

average revenue

Question 23

the change in total revenue from an additional unit sold

Answer 23

marginal revenue

Question 24

a cost that has already been committed and cannot be recovered

Answer 24

sunk cost

Question 25

a firm that is the sole seller of a product without close substitutes

Answer 25

monopoly

Question 26

a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms

Answer 26

natural monopoly

Question 27

the business practice of selling the same good at different prices to different customers

Answer 27

price discrimination

Question 28

a market structure in which many firms sell products that are similar but not identical

Answer 28

monopolistic competition

Question 29

a market structure in which only a few sellers offer similar or identical products

Answer 29

oligopoly

Question 30

the study of how people behave in strategic situations

Answer 30

game theory

Question 31

an agreement among firms in a market about quantities to produce or prices to change

Answer 31

collusion

Question 32

a group of firms acting in unison

Answer 32

cartel

Question 33

a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen

Answer 33

nash equilibrium

Question 34

a particular “game” between two captured prisoners that illustrates why cooperation is difficult to maintain even when it is mutually beneficial

Answer 34

prisoner's dilemma

Question 35

a strategy that is best for a player in a game regardless of the strategies chosen by the other players

Answer 35

dominant strategy

Question 36

the percentage of the population whose family income falls below an absolute level called the poverty line

Answer 36

poverty rate

Question 37

an absolute level of income set by the federal government for each family size below which a family is deemed to be in poverty

Answer 37

poverty line

Question 38

transfers to the poor given in the form of goods and services rather than cash

Answer 38

In-kind Transfers

Question 39

the regular pattern of income variation over a person’s life

Answer 39

Life Cycle

Question 40

a person’s normal income

Answer 40

Permanent Income

Question 41

the political philosophy according to which the government should choose policies to maximize the total utility of everyone in society

Answer 41

Utilitarianism

Question 42

a measure of happiness or satisfaction

Answer 42

Utility

Question 43

the political philosophy according to which the government should choose policies deemed just, as evaluated by an impartial observer behind a “veil of ignorance”

Answer 43

Liberalism

Question 44

the claim that the government should aim to maximize the well-being of the worst-off person in society

Answer 44

Maximin Criterion

Question 45

government policy aimed at protecting people against the risk of adverse events

Answer 45

Social Insurance

Question 46

the political philosophy according to which the government should punish crimes and enforce voluntary agreements but not redistribute income

Answer 46

Libertarianism

Question 47

government programs that supplement the incomes of the needy

Answer 47

Welfare

Question 48

a tax system that collects revenue from high-income households and gives subsidies to low-income households

Answer 48

Negative Income Tax

Question 49

the total number of workers, including both the employed and the unemployed

Answer 49

Labor Force

Question 50

the percentage of the labor force that is unemployed

Answer 50

Unemployment Rate

Question 51

the percentage of the adult population that is in the labor force

Answer 51

Labor-force participation rate

Question 52

the normal rate of unemployment around which the unemployment fluctuates

Answer 52

Natural rate of unemployment

Question 53

the deviation of unemployment from its natural rate

Answer 53

Cyclical unemployment

Question 54

individuals who would like to work but have given up looking for a job

Answer 54

Discouraged workers

Question 55

unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills

Answer 55

Frictional unemployment

Question 56

unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one

Answer 56

Structural unemployment

Question 57

the process by which workers find appropriate jobs given their tastes and skills

Answer 57

Job search

Question 58

a government program that partially protects workers’ incomes when they become unemployed

Answer 58

Unemployment Insurance

Question 59

a worker association that bargains with employers over wages, benefits, and working conditions

Answer 59

Union

Question 60

the process by which unions and firms agree on the terms of employment

Answer 60

Collective Bargaining

Question 61

the organized withdrawal of labor from a firm by a union

Answer 61

strike

Question 62

above-equilibrium wages paid by firms to increase worker productivity

Answer 62

efficiency wages

Question 63

he limit on the consumption bundles that a consumer can afford

Answer 63

budget constraint

Question 64

a curve that shows consumption bundles that give the consumer the same level of satisfaction

Answer 64

indifference curve

Question 65

the rate at which a consumer is willing to trade one good for another

Answer 65

marginal rate of substitutes

Question 66

two goods with straight-line indifference curves

Answer 66

perfect substitutes

Question 67

two goods with right-angle indifference curves

Answer 67

perfect complements

Question 68

a good for which an increase in income raises the quantity demanded

Answer 68

normal good

Question 69

a good for which an increase in income reduces the quantity demanded

Answer 69

inferior good

Question 70

the change in consumption that results when a price change moves the consumer to a higher or lower indifference curve

Answer 70

income effect

Question 71

the change in consumption that results when a price change moves the consumer along a given indifference curve to a point with a new marginal rate of substitution

Answer 71

substitution effect

Question 72

good for which an increase in the price raises the quantity demanded

Answer 72

giffen good

Question 73

a theory asserting that the quantity of money available determines the price level and that the growth rate in the quantity of money available determines the inflation rate

Answer 73

Quantity Theory of Money

Question 74

variables measured in monetary units

Answer 74

Nominal Variables

Question 75

variables measured in physical units

Answer 75

Real Variables

Question 76

the theoretical separation of nominal and real variables

Answer 76

Classical Dichotomy

Question 77

the proposition that changes in the money supply do not affect real variables

Answer 77

Monetary Neutrality

Question 78

the rate at which money changes hands

Answer 78

Velocity of Money

Question 79

the equation M x V x P x Y, which relates the quantity of money, the velocity of money, and the dollar value of the economy’s output of goods and services

Answer 79

Quantity Equation

Question 80

the revenue the government raises by creating money

Answer 80

Inflation Tax

Question 81

the one-for-one adjustment of the nominal interest rate to the inflation rate

Answer 81

Fisher Effect

Question 82

the resources wasted when inflation encourages people to reduce their money holdings

Answer 82

Shoeleather cost

Question 83

the costs of changing prices

Answer 83

Menu costs

Question 84

the price of a good that prevails in the world market for that good

Answer 84

world price

Question 85

tax on goods produced abroad and sold domestically

Answer 85

tariff

Question 86

he quantity of goods and services produced from each unit of labor input

Answer 86

productivity

Question 87

the stock equipment and structures that are used to produce goods and services

Answer 87

Physical Capital

Question 88

the knowledge and skills that workers acquire through education, training, and experience

Answer 88

Human Capital

Question 89

the inputs into the production of goods and services that are provided by nature, such as land, rivers, and mineral deposits

Answer 89

natural resources

Question 90

society’s understanding of the best ways to produce goods and services

Answer 90

Technological Knowledge

Question 91

the property whereby the benefit from an extra unit of an input declines as the quantity of the input increases

Answer 91

diminishing return

Question 92

the property whereby countries that start off poor tend to grow more rapidly than countries that start off rich

Answer 92

catch-up effect