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Economics
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The discipline that studies the allocation of scarce resources, among competing ends, to agents with unlimited wants and desires
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Equilibrium
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A state in which opposing forces are balanced such that one is not stronger than the other
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Elasticity
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A percentage change in one variable given a percentage change in another variable
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Isoquant
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A line that shows all input bundles that yield the same output
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Production Function
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The relationship between input quantities and output quantities
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Production Possibilities Frontier (PPF)
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the relationship that illustrates the tradeoff between outputs
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Efficiency
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an allocation is efficient if and only if it is feasible and no other allocation exists that can increase the output of one good without reducing the output of another good
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Opportunity Costs
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What you give up in order to get something
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Total Cost
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fixed costs plus variable costs
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Fixed costs
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cost incurred independent of output
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Variable costs
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costs related to output only
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Short run
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a time period over which at least one production input is held constant
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Long run
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a time period over which all production inputs are variable
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Present value
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The current value of future payments.
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Future value
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the amount a PV will become or an amount of money to be received at a future date.
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Interest rate
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The market rate of payment on borrowed funds that captures the risk and opportunity costs of capital
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Discount rate
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An individual's minimum rate of return, including opportunity costs and risks, required to justify an investment
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Compounding
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a method of calculating the future value of an investment given the present value payments for the investment
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Discounting
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a method for calculating the present value of an investment given future value payments.
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Simple rate of return
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Average annual net revenue divided by initial costs
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Internal rate of return
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the discount rate resulting in a NPV of zero
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Net present value
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The sum of the present value net cash flows minus the initial costs or the present value benefits minus the present value costs
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Benefit-cost ratio
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present value benefits divided by present value costs
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Payback period
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the number of periods required to recover the nominal value of the investment
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Inflation
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A rise in the nominal price level
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Consumer surplus
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The area below demand and above price or the gains to consumers from a market transaction
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Producer surplus
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The area below price and above supply or the gains to producers from a market transaction
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Gains from trade
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The total increase in welfare from a market transaction
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World Prices
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The price set by the intersection of excess supply and excess demand
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Economic Agent
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A decision maker in an economic model that attempts to optimize objective function subject to constraints
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Exogenous variables
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Variables in an economic model whose values are determined outside of the model (weather, etc.)
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Endogenous variables
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Variables in an economic model that that are determined by or within the model itself
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Min Field Capacity
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The rate at which a field needs to be harvested to accomplish it within a given time frame
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Machinery Capacity
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The rate at which a machine can accomplish a task after accounting for efficiency
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Field Efficiency
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A recognition and accounting for the fact that machines do not operate at 100% efficacy
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Field Days
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The number of days required to accomplish a task given machinery capacity
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Timeliness
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The cost in yield and quality due to the inability to operate instantaneously
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