AP Microeconomics Vocabulary Test #4

question

Accounting Profit

answer

The business's total revenue minus the explicit cost and depreciation

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Average Fixed Cost

answer

The fixed cost per unit of output

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Average Variable Cost

answer

The variable cost per unit of output

question

Average Total Cost

answer

Total cost divided by quantity of output produced

question

Barrier to Entry

answer

Something that prevents other firms from entering the industry

question

Commodity

answer

A standardized input bought and sold in bulk quantities

question

answer

Gives the creator of a literary or artistic work sole rights to profit from that work

question

Diseconomies of Scale

answer

When long-run average total cost increases as output increases

question

Economic Profit

answer

The total revenue minus the opportunity cost of its resources (usually less than the accounting profit)

question

Economies of Scale

answer

When long-run average total cost declines as output increases

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Explicit Cost

answer

A cost that involves actually laying out money

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Fixed Cost

answer

A cost that does not depend on the quantity of output produced; it is the cost of the fixed input

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Fixed Input

answer

An input whose quantity is fixed for a period of time and cannot be varied

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Herfindahl-Hirschman Index

answer

The square of each firm's share of market sales summed over the industry; it gives a picture of the industry market structure

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Imperfect Competition

answer

When no one firm has a monopoly, but producers nonetheless realize that they can affect market prices

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Implicit Cost

answer

Does not require an outlay of money; it is measured by the value, in dollar terms, of benefits that are forgone

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Long Run

answer

The time period in which all inputs can be varied

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Marginal Product

answer

The additional quantity of output produced by using one more unit of that input

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Marginal Revenue

answer

The change in total revenue generated by an additional unit of output

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Market Share

answer

The fraction of the total industry output accounted for by that producer's output

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Monopolistic Competition

answer

A market structure in which there are many competing firms in an industry, each firm sells a differentiated product, and there is free entry into and exit from the industry in the long run

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Monopoly

answer

A single firm sells a single, undifferentiated product

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MRC - Marginal Revenue Curve

answer

Shows how marginal revenue varies as output varies

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Natural Monopoly

answer

Exists when economies of scale provide a large cost advantage to a single firm that produces all of an industry's output

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Normal Profit

answer

An economic profit equal to zero; it is an economic profit just high enough to keep a firm engaged in its current activity.

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Oligopoly

answer

An industry with only a small number of firms

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Optimal Output Rule

answer

Says that profit is maximized by producing the quantity of output at which the marginal revenue of the last unit produced is equal to its marginal cost

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Patent

answer

Gives an inventor a temporary monopoly in the use or sale of an invention

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Perfect Competition

answer

A market structure in which a large number of firms all produce the same product

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Price Taker

answer

A buyer or seller that is unable to affect the market price

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Production Function

answer

The relationship between the quantity of inputs a firm uses and the quantity of output resources

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Short Run

answer

The time period in which at least one input is fixed

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Sunk Cost

answer

A cost that has already been incurred and is nonrecoverable; should be ignored in a decision about future actions

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Total Cost

answer

The sum of the fixed cost and the variable cost of producing that quantity of output

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Variable Cost

answer

A cost that depends on the quantity of output produced; cost of the variable input

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Variable Input

answer

An input whose quantity the firm can vary at any one time

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question

Accounting Profit

answer

The business's total revenue minus the explicit cost and depreciation

question

Average Fixed Cost

answer

The fixed cost per unit of output

question

Average Variable Cost

answer

The variable cost per unit of output

question

Average Total Cost

answer

Total cost divided by quantity of output produced

question

Barrier to Entry

answer

Something that prevents other firms from entering the industry

question

Commodity

answer

A standardized input bought and sold in bulk quantities

question

answer

Gives the creator of a literary or artistic work sole rights to profit from that work

question

Diseconomies of Scale

answer

When long-run average total cost increases as output increases

question

Economic Profit

answer

The total revenue minus the opportunity cost of its resources (usually less than the accounting profit)

question

Economies of Scale

answer

When long-run average total cost declines as output increases

question

Explicit Cost

answer

A cost that involves actually laying out money

question

Fixed Cost

answer

A cost that does not depend on the quantity of output produced; it is the cost of the fixed input

question

Fixed Input

answer

An input whose quantity is fixed for a period of time and cannot be varied

question

Herfindahl-Hirschman Index

answer

The square of each firm's share of market sales summed over the industry; it gives a picture of the industry market structure

question

Imperfect Competition

answer

When no one firm has a monopoly, but producers nonetheless realize that they can affect market prices

question

Implicit Cost

answer

Does not require an outlay of money; it is measured by the value, in dollar terms, of benefits that are forgone

question

Long Run

answer

The time period in which all inputs can be varied

question

Marginal Product

answer

The additional quantity of output produced by using one more unit of that input

question

Marginal Revenue

answer

The change in total revenue generated by an additional unit of output

question

Market Share

answer

The fraction of the total industry output accounted for by that producer's output

question

Monopolistic Competition

answer

A market structure in which there are many competing firms in an industry, each firm sells a differentiated product, and there is free entry into and exit from the industry in the long run

question

Monopoly

answer

A single firm sells a single, undifferentiated product

question

MRC - Marginal Revenue Curve

answer

Shows how marginal revenue varies as output varies

question

Natural Monopoly

answer

Exists when economies of scale provide a large cost advantage to a single firm that produces all of an industry's output

question

Normal Profit

answer

An economic profit equal to zero; it is an economic profit just high enough to keep a firm engaged in its current activity.

question

Oligopoly

answer

An industry with only a small number of firms

question

Optimal Output Rule

answer

Says that profit is maximized by producing the quantity of output at which the marginal revenue of the last unit produced is equal to its marginal cost

question

Patent

answer

Gives an inventor a temporary monopoly in the use or sale of an invention

question

Perfect Competition

answer

A market structure in which a large number of firms all produce the same product

question

Price Taker

answer

A buyer or seller that is unable to affect the market price

question

Production Function

answer

The relationship between the quantity of inputs a firm uses and the quantity of output resources

question

Short Run

answer

The time period in which at least one input is fixed

question

Sunk Cost

answer

A cost that has already been incurred and is nonrecoverable; should be ignored in a decision about future actions

question

Total Cost

answer

The sum of the fixed cost and the variable cost of producing that quantity of output

question

Variable Cost

answer

A cost that depends on the quantity of output produced; cost of the variable input

question

Variable Input

answer

An input whose quantity the firm can vary at any one time

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