Chapter One Vocab Flashcards
Asymmetric information
The relative holdings of data by individuals; when at least one party to an agreement has superior knowledge of some dimension of the agreement
bounded rationality
A property common to parties involved in economic exchange which implies that economic agents act with less than perfect information; arises because information is costly to acquire and preocess; that is, transaction costs will prevent parties form becoming fully informed
business reengineering
the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary modern measures of performance, such as cost, quality, service, and speed.”… leads to unemployment of those least likely to get hired already, which increases poverty.
concentration
importance of large producers in a market
Contract
an agreement between two or more people that specifies actions that each will take or assigns decision-making powers.
core competencies
An area of business in whichan organization has a competitive advantage not only in producing a good or service but also in developing new and related products
corporation
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decentralization
“a reduction in the importance of a command and control hierarchy and the emergence of more independent business units
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economic rents
“A term used used by economist to describe ““extra payments going to a resource; more specifically the benefits from an activity going to a resource in excess of what is needed to attract that resource to that activity; in a sense representing ““something for nothing””
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economies of scale
reduction in average unit cost as output expands
economies of scope
cost advantage from producing related yet different goods
Efficient
if it is impossible, given available resources, to implement an alternative arrangement under which all parties involved are at least as well off.
external contract
An agreement between the fimr and parties lacking an ownership or employment interest
final goods
Outputs produced in an economic system sold directly to consumers without further processing
Firm / Organization
A conscious, willful effort to organize economic activity that consists of a collection of contracts when more than one party is involved…. a legal entity, recognized by law, which is permitted to enter into binding contracts with other persons and firms.
flexible manufacturing systems
systems that could produce a wide variety of products. Not as focused on high volume as on specialized high value goods… organized horizontally with consideral synthesis and overlap amond units….priority placed on innovation requires stong supplier relations
Gross Domestic Product (GDP)
total money value of the goods and services produces by the residents of a country in a given period
Gross National Produc (GNP)
measure of the incomes of the residents of a country including incomes earned abroad but excluding payments made to those abroad…. An economic statistic that includes GDP, plus any income earned by residents from overseas investments, minus income earned within the domestic economy by overseas residents.
intermediate goods
Output subject to later processing before ultimately being sold to consumers
internal contract
An agreement limited to parties within a firm; typically vague with some amount of latitude given to each of the involved parties
junk bonds
a high-yield, high-risk security, typically issued by a company seeking to raise capital quickly in order to finance a takeover.
make-or-buy decision
The choice a firm must make as to whether it should make an intermediate good in house or secure in in some market
moral hazard
An ex post contracting situation and source of transaction costs that occurs when one party’s actions are imperfectly observable and when the incentives of the parties may be less than perfectly aligned.
opportunistic behavior
Action taken when one party to an agreement acts in his or her own selfish interests, even at the expense of other parties involved in the agreement
