question
FIN6446 COMPETITIVE STRATEGY MIDTERM STUDY GUIDE
answer
...
question
Chapter 1
answer
...
question
Benefit
answer
The benefit of something is the gain or pleasure that it brings and is determined by preferences.
question
Capital
answer
The tools, equipment, buildings, and other constructions that businesses use to produce goods and services.
question
Economic model
answer
A description of some aspect of the economic world that includes only those features of the world that are needed for the purpose at hand.
question
Economics
answer
The social science that studies the choices that individuals, businesses, governments, and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices.
question
Efficient
answer
Resource use is efficient if it is not possible to make someone better off without making someone else worse off.
question
Entrepreneurship
answer
The human resource that organizes the other three factors of production: labor, land, and capital.
question
Factors of production
answer
The productive resources used to produce goods and services.
question
Goods and services
answer
The objects that people value and produce to satisfy human wants.
question
Human capital
answer
The knowledge and skill that people obtain from education, on-the-job training, and work experience.
question
Hyperinflation
answer
An inflation rate of 50 percent a month or higher that grinds the economy to a halt and causes a society to collapse.
question
Incentive
answer
A reward that encourages an action or a penalty that discourages one.
question
Interest
answer
The income that capital earns.
question
Labor
answer
The work time and work effort that people devote to producing goods and services.
question
Land
answer
The "gifts of nature" that we use to produce goods and services.
question
Macroeconomics
answer
The study of the performance of the national economy and the global economy.
question
Margin
answer
When a choice is made by comparing a little more of something with its cost, the choice is made at the margin.
question
Marginal benefit
answer
The benefit that a person receives from consuming one more unit of a good or service. It is measured as the maximum amount that a person is willing to pay for one more unit of the good or service.
question
Marginal cost
answer
The opportunity cost of producing one more unit of a good or service. It is the best alternative forgone. It is calculated as the increase in total cost divided by the increase in output.
question
Microeconomics
answer
The study of the choices that individuals and businesses make, the way these choices interact in markets, and the influence of governments.
question
Opportunity cost
answer
The highest-valued alternative that we must give up to get something.
question
Preferences
answer
A description of a person's likes and dislikes and the intensity of those feelings.
question
Profit
answer
The income earned by entrepreneurship.
question
Rational choice
answer
A choice that compares costs and benefits and achieves the greatest benefit over cost for the person making the choice.
question
Rent
answer
The income that land earns.
question
Scarcity
answer
The inability to satisfy all our wants.
question
Self-interest
answer
The choices that you think are the best ones available for you are choices made in your self-interest.
question
Social interest
answer
Choices that are the best ones for society as a whole.
question
Tradeoff
answer
A constraint that involves giving up one thing to get something else.
question
Wages
answer
The income that labor earns.
question
Chapter 2
answer
...
question
Absolute advantage
answer
A person has an absolute advantage if that person is more productive than another person.
question
Allocative efficiency
answer
A situation in which goods and services are produced at the lowest possible cost and in the quantities that provide the greatest possible benefit. We cannot produce more of any good without giving up some of another good that we value more highly.
question
Capital accumulation
answer
The growth of capital resources, including human capital.
question
Comparative advantage
answer
A person or country has a comparative advantage in an activity if that person or country can perform the activity at a lower opportunity cost than anyone else or any other country.
question
Economic growth
answer
The expansion of production possibilities.
question
Firm
answer
An economic unit that hires factors of production and organizes those factors to produce and sell goods and services.
question
Marginal benefit
answer
The benefit that a person receives from consuming one more unit of a good or service. It is measured as the maximum amount that a person is willing to pay for one more unit of the good or service.
question
Marginal benefit curve
answer
A curve that shows the relationship between the marginal benefit of a good and the quantity of that good consumed.
question
Marginal cost
answer
The opportunity cost of producing one more unit of a good or service. It is the best alternative forgone. It is calculated as the increase in total cost divided by the increase in output.
question
Market
answer
Any arrangement that enables buyers and sellers to get information and to do business with each other.
question
Money
answer
Any commodity or token that is generally acceptable as a means of payment.
question
Opportunity cost
answer
The highest-valued alternative that we must give up to get something.
question
Preferences
answer
A description of a person's likes and dislikes and the intensity of those feelings.
question
Production efficiency
answer
A situation in which goods and services are produced at the lowest possible cost.
question
Production possibilities frontier
answer
The boundary between those combinations of goods and services that can be produced and those combinations that cannot.
question
Property rights
answer
The social arrangements that govern the ownership, use, and disposal of anything that people value. Property rights are enforceable in the courts.
question
Technological change
answer
The development of new goods and of better ways of producing goods and services.
question
Chapter 3
answer
...
question
Change in demand
answer
A change in buyers' plans that occurs when some influence on those plans other than the price of the good changes. It is illustrated by a shift of the supply curve.
question
Change in supply
answer
A change in sellers' plans that occurs when some influence on those plans other than the price of the good changes. It is illustrated by a shift of the supply curve.
question
Change in the quantity demanded
answer
A change in buyers' plans that occurs when the price of a good changes but all other influences on buyers' plans remain unchanged. It is illustrated by a movement along the demand curve.
question
Change in the quantity supplied
answer
A change in sellers' plans that occurs when the price of a good changes but all other influences on sellers; plans remain unchanged. It is illustrated by a movement along the supply curve.
question
Competitive market
answer
A market that has many and many sellers, so no single buyer or seller can influence the price.
question
Complement
answer
A good that is used in conjunction with another good.
question
Demand
answer
The entire relationship between the price of the good and the quantity demanded of it when all other influences on buyers' plans remain the same. It is illustrated by a demand curve and described by a demand schedule.
question
Demand curve
answer
A curve that shows the relationship between the quantity demanded of a good and its price when all other influences on consumers' planned purchases remain the same.
question
Equilibrium price
answer
The price at which the quantity demanded equals the quantity supplied.
question
Equilibrium quantity
answer
The quantity bought and sold at the equilibrium price.
question
Inferior good
answer
A good for which demand decreases as income increases.
question
Law of demand
answer
Other things remaining the same, the higher the price of a good, the smaller is the quantity demanded of it; the lower the price of a good, the larger is the quantity demanded of it.
question
Law of supply
answer
Other things remaining the same, the higher the price of a good, the greater is the quantity supplied of it; the lower the price of a good, the smaller is the quantity supplied.
question
Money price
answer
The number of dollars that must be given up in exchange for a good or service.
question
Normal good
answer
A good for which demand increases as income increases.
question
Quantity demanded
answer
The amount of a good or service that consumers plan to buy during a given time period at a particular price.
question
Quantity supplied
answer
The amount of a good or service that producers plan to sell during a given time period at a particular price.
question
...
answer
...
question
Relative price
answer
The ratio or the price of one good or service to the price of another good or service. A relative price is an opportunity cost.
question
Substitute
answer
A good that can be used in place of another good.
question
Supply
answer
The entire relationship between the price of a good and the quantity supplied of it when all other influences on producers' planned sales remain the same. It is described by a supply schedule and illustrated by a supply curve.
question
Supply curve
answer
A curve that shows the relationship between the quantity supplied of a good and its price when all other influences on producers' planned sales remain the same.
question
Chapter 4
answer
...
question
Cross elasticity of demand
answer
The responsiveness of the demand for a good to a change in the price of a substitute or complement, other things remaining the same. It is calculated as the percentage change in the quantity demanded of the good divided by the percentage change in the price of the substitute or complement.
question
Elastic demand
answer
Demand with a price elasticity greater than 1; other things remaining the same, the percentage change in the quantity demanded exceeds the percentage change in price.
question
Elasticity of supply
answer
The responsiveness or the quantity supplied of a good to a change in its price, other things remaining the same.
question
Income elasticity of demand
answer
The responsiveness of demand to a change in income, other things remaining the same. It is calculated as the percent change in the quantity demanded divided by the percentage change in income.
question
Inelastic demand
answer
A demand with a price elasticity between 0 and 1; the percentage change in the quantity demanded is less than the percentage change in price.
question
Perfectly elastic demand
answer
Demand with an infinite price elasticity; the quantity demanded changes by an infinitely large percentage in response to a tiny price change.
question
Perfectly inelastic demand
answer
Demand with a price elasticity of zero; the quantity demanded remains constant when the price changes.
question
Total revenue
answer
The value of a firm's sales. It is calculated as the price of the good multiplied by the quantity sold.
question
Total revenue test
answer
A method of estimating the price elasticity of demand by observing the change in total revenue that results from a change in the price, when all other influences on the quantity sold remain the same.
question
Unit elastic demand
answer
Demand with a price elasticity of 1; the percentage change in the quantity demanded equals the percentage change in price.
question
Chapter 10
answer
...
question
Command system
answer
A method of allocating resources by the order (command) of someone in authority. In a firm a managerial hierarchy organizes production.
question
Economic depreciation
answer
The fall in the market value of a firm's capital over a given period.
question
Economic efficiency
answer
A situation that occurs when the firm produces a given output at the least cost.
question
Economic profit
answer
A firm's total revenue minus its total cost, with total cost measured as the opportunity cost of production.
question
Economies of scale
answer
Features of a firm's technology that make average total cost fall as output increases - the LRAC curve slopes downward.
question
Economies of scope
answer
Decreases in average total cost that occur when a firm uses specialized resources to produce a range of goods and services.
question
Firm
answer
An economic unit that hires factors of production and organizes those factors to produce and sell goods and services.
question
Four-firm concentration ratio
answer
A measure of market power that is calculated as the percentage of the value of sales accounted for by the four largest firms in an industry.
question
Herfindahl-Hirschman Index
answer
A measure of market power that is calculated as the square of the market share of each firm (as a percentage) summed over the largest 50 firms (or over all firms if there are fewer than 50) in a market.
question
Implicit rental rate
answer
The firm's opportunity cost of using its own capital.
question
Incentive system
answer
A method of organizing production that uses a market-like mechanism inside the firm.
question
Monopolistic competition
answer
A market structure in which a large number of firms make similar but slightly different products and compete on product quality, price, and marketing, and firms are free to enter or exit the market.
question
Monopoly
answer
A market structure in which there is one firm, which produces a good or service that has no close substitutes and in which the firm is protected from competition by a barrier preventing the entry of new firms.
question
Normal profit
answer
The return to entrepreneurship is normal profit and it is the profit that an entrepreneur earns on average.
question
Oligopoly
answer
A market structure in which a small number of firms compete.
question
Perfect competition
answer
A market structure in which there are many firms each selling an identical product; there are many buyers; there are not restrictions on entry into the industry; firms in the industry have no advantage over potential new entrants; and firms and buyers are well informed about the price of each firm's product.
question
Principal-agent problem
answer
The problem of devising compensation rules that induce an agent to act in the best interest of a principal.
question
Product differentiation
answer
Making a product slightly different from the product of a competing firm.
question
Technological efficiency
answer
A situation that occurs when the firm produces a given output by using the least amount of inputs.
question
Technology
answer
Any method of producing a good or service.
question
Transactions costs
answer
The opportunity costs of making trades in a market. The costs that arise from finding someone with whom to do business, or reaching an agreement about the price and other aspects of the exchange, and of ensuring that the terms of the agreement are fulfilled.
question
Chapter 11
answer
...
question
Average fixed cost
answer
Total fixed cost per unit of output.
question
Average product
answer
The average product of a factor of production. It equals total product divided by the quantity of the factor employed.
question
Average total cost
answer
Total cost per unit of output
question
Average variable cost
answer
Total variable cost per unit of output.
question
Constant returns to scale
answer
Features of a firm's technology that lead to constant long-run average cost as output increases. When constant returns to scale are present, the LRAC curve is horizontal.
question
Diminishing marginal returns
answer
The tendency for the marginal product of an additional unit of a factor of production to be less than the marginal product of the previous unit of the factor.
question
Diseconomies of scale
answer
Features of a firm's technology that make average total cost rise as output increases-the LRAC curve slopes upwards.
question
Economies of scale
answer
Features of a firm's technology that make average total cost fall as output increases-the LRAC curve slopes downward.
question
Law of diminishing returns
answer
As a firm uses more of a variable factor of production with a given quantity of the fixed factor of production, the marginal product of the variable factor of production eventually diminishes.
question
Long run
answer
The time frame in which the quantities of all factors of production can be varied.
question
Long-run average cost curve
answer
The relationship between the lowest attainable average total cost and output when the firm can change both the plant it uses and the quantity of labor it employs.
question
Marginal cost
answer
The opportunity cost of producing one more unit of a good or service. It is the best alternative forgone. It is calculated as the increase in total cost divided by the increase in output.
question
Marginal product
answer
The increase in total product that results from a one-unit increase in the variable input, with all other inputs remaining the same. It is calculated as the increase in total product divided by the increase in the variable input employed, when the quantities of all other inputs remain the same.
question
Minimum efficient scale
answer
The smallest quantity of output at which the long-run average cost reaches its lowest level.
question
Short run
answer
The time frame in which the quantity of at least one factor of production is fixed and the quantities of the other factors can be varied. The fixed factor is usually capital-that is, the firm uses a given plant.
question
Sunk cost
answer
The past expenditure on a plant that has no resale value.
question
Total cost
answer
The cost of all the productive resources that a firm uses.
question
Total fixed cost
answer
The cost of the firm's fixed inputs.
question
Total product
answer
The maximum output that a given quantity of labor can produce.
question
Total variable cost
answer
The cost of all the firm's variable inputs.
question
Chapter 12
answer
...
question
Marginal revenue
answer
The change in total revenue that results from a one-unit increase in the quantity sold. It is calculated as the change in total revenue divided by the change in quantity sold.
question
Perfect competition
answer
A market in which there are many firms each selling an identical product; there are many buyers; there are no restrictions on entry into the industry; firms in the industry have no advantage over potential new entrants; and firms and buyers are well informed about the price of each firm's product.
question
Price taker
answer
A firm that cannot influence the price of the good or service it produces.
question
Short-run market supply curve
answer
A curve that shows the quantity supplied in a market at each price when each firm's plant and the number of firms remain the same.
question
Shutdown point
answer
The price and quantity at which the firm is indifferent between producing the profit-maximizing output and shutting down temporarily. The shutdown point occurs at the price and the quantity at which average variable cost is a minimum.
question
Total revenue
answer
The value of a firm's sales. It is calculated as the price of the good multiplied by the quantity sold.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
