Exam 2 (Chapters 6, 7, and 8) Flashcards

1
Q

The total satisfaction you derive from consumption; this could refer to either your total utility of consuming a particular good or your total utility from all consumption

A

Total utility

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2
Q

The change in your total utility from a one-unit change in your consumption of a good

A

Marginal utility

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3
Q

The more of a good a person consumers per period, the smaller the increase in total utility from consuming one more unit, other things constant

A

Law of diminishing marginal utility

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4
Q

The condition in which an individual consumer’s budget is exhausted and the last dollar spent on each good yields the same marginal utility; therefore, utility is maximized

A

Consumer equilibrium

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5
Q

The dollar value of the marginal utility derived from consuming each additional unity of a good

A

Marginal valuation

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6
Q

The difference between the most a consumer would pay for a given quantity of a good and what the consumer actually pays

A

Consumer surplus

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7
Q

Opportunity cost of resources employed by a firm that takes the form of cash payments

A

Explicit cost

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8
Q

A firm’s opportunity cost of using its own resources or those provided by its owners without a corresponding cash payment

A

Implicit cost

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9
Q

A firm’s total revenue minus its explicit costs

A

Accounting profit

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10
Q

A firm’s total revenue minus its explicit and implicit costs

A

Economic profit

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11
Q

The accounting profit earned when all resources earn their opportunity cost

A

Normal profit

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12
Q

Any resource that can be varied in the short run to increase or decrease production

A

Variable resource

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13
Q

Any resource that cannot be varied in the short run

A

Fixed resource

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14
Q

A period during which at least on of a firm’s resources is fixed

A

Short run

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15
Q

A period during which all resources under the firm’s control are variable

A

Long run

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16
Q

A firm’s total output

A

Total product

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17
Q

The relationship between the amount of resources employed and a firm’s total product

A

Production function

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18
Q

The change in total product that occurs when the use of a particular resource increases by one unit, all other resources constant

A

Marginal product

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19
Q

The marginal product of a variable resource increases as each additional unity of that resource is employed

A

Increasing marginal returns

20
Q

As more of a variable resource is added to a given amount of another resource marginal product eventually declines and could become negative

A

Law of diminishing marginal returns

21
Q

Any production cost that is independent of the firm’s rate of output

A

Fixed cost

22
Q

Any production cost that changes as the rate of output changes

A

Variable cost

23
Q

The sum of fixed cost and variable cost, or TC = FC + VC

A

Total cost

24
Q

The change in total cost resulting from a one-unit change in output; the change in total cost divided by the change in output, or MC = change in TC/change in q

A

Marginal cost

25
Variable cost divided by output, or AVC = VC/q
Average variable cost
26
Total cost divided by output, or ATC = TC/q; the sum of average fixed cost and average variable cost, or ATC = AFC + AVC
Average total cost
27
Forces that reduce a firm's average cost as the scale of operation increases in the long run
Economies of scale
28
Forces that may eventually increase a firm's average cost as the scale of operation increase in the long run
Diseconomies of scale
29
A curve that indicates the lowest average cost of production at each rate of output when the size, or scale, of the firm varies; also called the planning curve
Long-run average cost curve
30
A cost that occurs when, over some range of output, long-run average cost neither increases nor decreases with changes in firm size
Constant long-run average cost
31
The lowest rate of output at which a firm takes full advantage of economies of scale
Minimum efficient scale
32
Important features of a market, such as the number of firms, product uniformity across firms, firm's ease of entry and exit, and forms of competition
Market structure
33
A market structure with many fully informed buyers and sellers of a standardized product and no obstacles to entry or exit of firms in the long run
Perfect competition
34
A standardized product, a product that does not differ across producers, such as bushels of wheat or an ounce of gold
Commodity
35
A firm that faces a given market price and whose quantity supplied has no effect on that price; a perfectly competitive firm that decides to produce must accept, or "take," the market price
Price taker
36
The firm's change in total revenue from selling an additional unity; a perfectly competitive firm's marginal revenue is also the market price
Marginal revenue (MR)
37
To maximize profit or minimize loss, a firm should produce the quantity at which marginal revenue equals marginal cost; this rule holds for all market structures
Golden rule of profit maximization
38
Total revenue divided by quantity, or AR = TR/q; in all market structures, average revenue equals the market price
Average revenue
39
A curve that shows how much a firm supplies at each price in the short run; in perfect competition, that portion of a firm's marginal cost curve that intersects and rises above the low point on its average variable cost curve
Short-run firm supply curve
40
A curve that indicates the quantity supplied by the industry at each price in the short run; in perfect competition, the horizontal sum of each firm's short-run supply curve
Short-run industry supply curve
41
A curve that shows the relationship between price and quantity supplied by the industry once firms adjust in the long run to any change in market demand
Long-run industry supply curve
42
An industry that can expand or contract without affecting the long-run per-unit cost of production; the long-run industry supply curve is horizontal
Constant-cost industry
43
An industry that faces higher per-unit production costs as industry output expands in the long run; the long-run industry supply curve slopes upward
Increasing-cost industry
44
The condition that exists when production uses the least-cost combination of inputs; minimum average cost in the long run
Productive efficiency
45
The condition that exists when firms produce the output most preferred by consumers; marginal benefit equals marginal cost
Allocative efficiency
46
A bonus for producers in the short run; the amount by which total revenue production exceeds variable cost
Producer surplus
47
The overall well-being of people in the economy; maximized when the marginal cost of production equals the marginal benefit to consumers
Social welfare