question
Explicit cost
answer
a cost that requires an outlay of money
question
Implicit cost
answer
does not require an outlay of money
question
Accounting profit
answer
equal to revenue minus explicit cost
question
Economic profit
answer
equal to revenue minus the opportunity cost of resources used
question
Marginal cost
answer
producing a good or service is the additional cost incurred by producing one more until of that good or service.
question
Marginal benefit
answer
of a good or service is the additional benefit derived from producing one more until of that good or service
question
Principle of marginal analysis
answer
to determine if the costs associated with the change in activity will result in a benefit that is sufficient enough to offset them
question
Sunk cost
answer
a cost that has already been incurred and is nonrecoverable. Sunk cost should be ignored in decisions about future actions
question
Bounded Rationality
answer
a decision maker operating with bounded rationality makes a choice that is close to but not exactly the one that leas to the best possible economics outcome
question
Risk aversion
answer
the willingness to sacrifice some economic payoff in order to avoid a potential loss
question
status quo bias
answer
the tendency to avoid making a decision and sticking with the status quo
question
Principle of diminishing marginal utility
answer
each successive unit of a good or service consumed adds less to Toal utility than the previous unit
question
Optimal consumption rules
answer
when a consumer maximizes utility, the marginal utility per dollar spent must be the same for all good dns services in the consumption bundle
question
Substitution effect
answer
of a change in the price of a good is the change in the quanitiyu of that good consumed as the consumer substitutes other good that are now relatively cheaper in place of a good that has become relatively more expensive
question
Income effect
answer
a change in the price of a good is the change in the quantity of that good consumed that results form a change in the consumers purchasing power due to the change in the price of the good
question
Indifference curve
answer
a line that shows all the consumption bundles that yield the same amount of total utility for an individual
question
Marginal rate of substitution
answer
of good R in place of good M is equal to MUr/MUm, the ration of the marginal utility of R to the marginal utility of M.
question
Fixed input
answer
an input whose quantity is fixed for a period of time and cannot be varied
question
Variable input
answer
an input whose quantity the firm can very at any time
question
long run
answer
the time period in which all inputs can be varied
question
short run
answer
the time period in which at least one input is fixed
question
Long-run average total cost curve
answer
shows the relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output
question
Decreasing returns to scale
answer
when long-run average total cost increases as output increases
question
constant returns to scale
answer
when long-run average total cost is constant as output increases
question
Perfectly competitive market
answer
a market in which all market participants are price-takers
question
Marginal revenue
answer
the change in total revenue generated by an additional unit of output
question
Optimal output rule
answer
profit ia maximized by producing the quantity of output at which the marginal revenue of the last unit produced is equal to its marginal cost
question
Break-even price
answer
of a piece-taking firm is the market price at which is earns zero profit
question
Shut-down price
answer
a firm will cease production in the short urn if the market price falls below the shut down price, which is equal to minimum average variable cost
question
Short-run market equilibrium
answer
the quantity supplied equals the quantity demanded, taking the number of producers as given
question
Long-run market equilibrium
answer
when the quantity supplied equals the quantity demanded, given hat sufficient time has elapsed for entry into an exit from the industry to occur
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
