key turms

Question 1

cost efficiency -

Answer 1

where a firm uses the most appropriate combination of inputs of factors of production, given the relative costs of those factors.

Question 2

economic agents -

Answer 2

are responsible for making decisions and include consumers, producers, and governments

Question 3

entrepreneur -

Answer 3

the individual who takes a risk in combining the factors of production

Question 4

market -

Answer 4

a way in which buyers and sells come together to exchange products

Question 5

normative statement -

Answer 5

a statement that is subjective and expresses a value judgment

Question 6

positive statement -

Answer 6

a statement that is factual and objective

Question 7

profit -

Answer 7

the reward to enterprise, defined as the difference between total revenue and total costs

Question 8

profit maximisation -

Answer 8

the situation where marginal cost is equal to marginal revenue

Question 9

sales maximisation -

Answer 9

where the objective of a firm is to maximize the volume of products sold

Question 10

stakeholder -

Answer 10

anyone with an interest in the business

Question 11

scarce resource -

Answer 11

anything that is not available in unlimited quantities

Question 12

opportunity cost -

Answer 12

the benefits of the next best alternative to a decision made

Question 13

entrepreneur -

Answer 13

a person who sets up a business, takeing the risks and organizing the three factors of production

Question 14

satisficing -

Answer 14

reaching a good enough profit level without maximizing

Question 15

profit -

Answer 15

a surplus of sales revenue over costs

Question 16

creditors -

Answer 16

someone whom the business owes money to

Question 17

creative destruction -

Answer 17

the way in which quality-improving innovations lead to economic growth

Question 18

added value -

Answer 18

the difference between the cost of material inputs and the eventual value of the product