HCM 402 Econ Final Modules 7-9

question

budget constraint

answer

shows the possible combinations of two goods that are affordable given a consumers limited income

question

total utility

answer

satisfaction derived from consumer choices

question

marginal utility

answer

the additional utility provided by one additional unit of consumption

question

diminishing marginal utility

answer

the common pattern that each marginal unit of a good consumed provides less of an addition to utility than the previous unit

question

marginal utility per dollar

answer

the additional satisfaction gained from purchasing a good given the price of the product; MU/Price

question

substituion effect

answer

when a price changes, consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price; always happens simultaneously with an income effect

question

income effect

answer

a higher price means that, in effect, the buying power of income has been reduced, even though actual income has not changed; always happens simultaneously with a substitution effect

question

fungible

answer

units of a good are capable of mutual substitution with each other and carry equal value to the individual

question

behavioral economics

answer

the study of situations in which people make choices that do not appear to be economically rational

question

firm

answer

an organization that uses resources to produce a product, which it then sells

question

private enterprise

answer

the ownership of businesses by private individuals

question

production

answer

the process of combining inputs to produce outputs, ideally of a value greater than the value of the inputs

question

revenue

answer

the income a firm generates from selling its products

question

explicit costs

answer

out-of-pocket costs for a firm, for example, payments for wages and salaries, rent, or materials

question

implicit costs

answer

the opportunity costs of the resources supplied by the firm's owners

question

accounting profit

answer

the difference between dollars brought in and dollars paid out

question

economic profit

answer

includes both explicit and implicit costs

question

economic profit equals

answer

total revenue - total cost

question

Total costs equals

answer

explicit costs + implicit costs

question

factors of production (inputs)

answer

resources that firms use to produce their products, for example, labor and capital

question

production function

answer

mathematical equation that tells how much output a firm can produce with given amounts of the inputs

question

fixed inputs

answer

factors of production that can't be easily increased or decreased in a short period of time

question

variable inputs

answer

factors of production that a firm can easily increase or decrease in a short period of time

question

short run

answer

the period of time during which at least one of a firm's inputs is fixed

question

long run

answer

period of time during which all of a firm's inputs are variable

question

marginal product

answer

The additional output that can be produced by adding one more unit of a specific input, ceteris paribus.

question

law of diminishing marginal productivity

answer

general rule that as a firm employs more labor, eventually the amount of additional output produced declines

question

factor payments

answer

what the firm pays for the use of factors of production

question

variable costs

answer

costs of the variable inputs, like labor

question

fixed costs

answer

costs of the fixed inputs, like rent

question

total costs

answer

the sum of the fixed and variable costs for any given level of production

question

Average Total Cost (ATC)

answer

total costs divided by quantity of output

question

marginal cost

answer

the additional cost to a firm of producing one more unit of a good or service

question

Average Variable Cost (AVC)

answer

variable cost divided by the quantity of output

question

average profit (profit margin)

answer

price - average cost

question

production technologies

answer

alternative methods of combining inputs to produce output

question

economies of scale

answer

a situation in which the average cost of production falls as the firm gets larger

question

long-run average cost curve

answer

shows the lowest cost at which a firm is able to produce a given quantity of output in the long run, when no inputs are fixed

question

short-run average cost (SRAC) curve

answer

the average total cost curve in the short term; shows the total of the average fixed costs and the average variable costs

question

constant returns to scale

answer

when expanding all inputs does not change the average cost of production

question

diseconomies of scale

answer

the long-run average cost of producing each individual unit increases as total output increases

question

market structure

answer

the conditions in an industry, such as number of sellers, how easy or difficult it is for a new firm to enter, and the type of products that are sold

question

perfect competition

answer

each firm faces many competitors that sell identical products

question

price taker

answer

a firm that faces a given market price and whose quantity supplied has no effect on that price; a perfectly competitive firm

question

Marginal Revenue (MR)

answer

the additional revenue gained from selling one more unit

question

shutdown point

answer

the intersection of the average variable cost curve and the marginal cost curve, which shows the price where the firm would lack enough revenue to cover its variable costs

question

entry

answer

when new firms enter the industry in response to increased industry profits

question

exit

answer

the long-run process of firms reducing production and shutting down in response to industry losses

question

long run equilibrium

answer

where all firms earn zero economic profits producing the output level where P = MR = MC and P = AC

question

constant cost industry

answer

as demand increases, the cost of production for firms stays the same

question

increasing cost industry

answer

as demand increases, the cost of production for firms increases

question

decreasing cost industry

answer

as demand increases the costs of production for the firms decreases

question

allocative efficiency

answer

means that among the points on the production possibility frontier, the chosen point is socially preferred

1 of 53

question

budget constraint

answer

shows the possible combinations of two goods that are affordable given a consumers limited income

question

total utility

answer

satisfaction derived from consumer choices

question

marginal utility

answer

the additional utility provided by one additional unit of consumption

question

diminishing marginal utility

answer

the common pattern that each marginal unit of a good consumed provides less of an addition to utility than the previous unit

question

marginal utility per dollar

answer

the additional satisfaction gained from purchasing a good given the price of the product; MU/Price

question

substituion effect

answer

question

income effect

answer

a higher price means that, in effect, the buying power of income has been reduced, even though actual income has not changed; always happens simultaneously with a substitution effect

question

fungible

answer

units of a good are capable of mutual substitution with each other and carry equal value to the individual

question

behavioral economics

answer

the study of situations in which people make choices that do not appear to be economically rational

question

firm

answer

an organization that uses resources to produce a product, which it then sells

question

private enterprise

answer

the ownership of businesses by private individuals

question

production

answer

the process of combining inputs to produce outputs, ideally of a value greater than the value of the inputs

question

revenue

answer

the income a firm generates from selling its products

question

explicit costs

answer

out-of-pocket costs for a firm, for example, payments for wages and salaries, rent, or materials

question

implicit costs

answer

the opportunity costs of the resources supplied by the firm's owners

question

accounting profit

answer

the difference between dollars brought in and dollars paid out

question

economic profit

answer

includes both explicit and implicit costs

question

economic profit equals

answer

total revenue - total cost

question

Total costs equals

answer

explicit costs + implicit costs

question

factors of production (inputs)

answer

resources that firms use to produce their products, for example, labor and capital

question

production function

answer

mathematical equation that tells how much output a firm can produce with given amounts of the inputs

question

fixed inputs

answer

factors of production that can't be easily increased or decreased in a short period of time

question

variable inputs

answer

factors of production that a firm can easily increase or decrease in a short period of time

question

short run

answer

the period of time during which at least one of a firm's inputs is fixed

question

long run

answer

period of time during which all of a firm's inputs are variable

question

marginal product

answer

The additional output that can be produced by adding one more unit of a specific input, ceteris paribus.

question

law of diminishing marginal productivity

answer

general rule that as a firm employs more labor, eventually the amount of additional output produced declines

question

factor payments

answer

what the firm pays for the use of factors of production

question

variable costs

answer

costs of the variable inputs, like labor

question

fixed costs

answer

costs of the fixed inputs, like rent

question

total costs

answer

the sum of the fixed and variable costs for any given level of production

question

Average Total Cost (ATC)

answer

total costs divided by quantity of output

question

marginal cost

answer

the additional cost to a firm of producing one more unit of a good or service

question

Average Variable Cost (AVC)

answer

variable cost divided by the quantity of output

question

average profit (profit margin)

answer

price - average cost

question

production technologies

answer

alternative methods of combining inputs to produce output

question

economies of scale

answer

a situation in which the average cost of production falls as the firm gets larger

question

long-run average cost curve

answer

shows the lowest cost at which a firm is able to produce a given quantity of output in the long run, when no inputs are fixed

question

short-run average cost (SRAC) curve

answer

the average total cost curve in the short term; shows the total of the average fixed costs and the average variable costs

question

constant returns to scale

answer

when expanding all inputs does not change the average cost of production

question

diseconomies of scale

answer

the long-run average cost of producing each individual unit increases as total output increases

question

market structure

answer

the conditions in an industry, such as number of sellers, how easy or difficult it is for a new firm to enter, and the type of products that are sold

question

perfect competition

answer

each firm faces many competitors that sell identical products

question

price taker

answer

a firm that faces a given market price and whose quantity supplied has no effect on that price; a perfectly competitive firm

question

Marginal Revenue (MR)

answer

the additional revenue gained from selling one more unit

question

shutdown point

answer

the intersection of the average variable cost curve and the marginal cost curve, which shows the price where the firm would lack enough revenue to cover its variable costs

question

entry

answer

when new firms enter the industry in response to increased industry profits

question

exit

answer

the long-run process of firms reducing production and shutting down in response to industry losses

question

long run equilibrium

answer

where all firms earn zero economic profits producing the output level where P = MR = MC and P = AC

question

constant cost industry

answer

as demand increases, the cost of production for firms stays the same

question

increasing cost industry

answer

as demand increases, the cost of production for firms increases

question

decreasing cost industry

answer

as demand increases the costs of production for the firms decreases

question

allocative efficiency

answer

means that among the points on the production possibility frontier, the chosen point is socially preferred

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