Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Intro to Microeconomics > Midterm 2 > Flashcards

Midterm 2 Flashcards

1
Q

budget constraint (or budget line)

A

shows the possible combinations of two goods that are affordable given a consumer’s limited income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

total utility

A

the satisfaction a consumer gets from consuming some quantity of a good or service; also, it’s the total satisfaction from consuming all the goods and services an individual purchases.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

utility

A

the term economists use to describe the satisfaction or happiness a person gets from consuming a good or service.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

calculate marginal utility

A

MU=change in total utility/change in quantity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

diminishing marginal utility

A

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

marginal utility

A

the additional utility provided by one additional unit of consumption

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

calculate marginal utility per dollar

A

marginal utility per dollar=marginal utility/price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

consumer equilibrium

A

the combination of goods and services that will maximize an individual’s total utility

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

marginal utility per dollar

A

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

factors of production (or inputs)

A

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

firm

A

an organization that combines inputs of labor, capital, land, and raw or finished component materials to produce outputs.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

production

A

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Marginal product

A

additional output of one more worker;
MP=ΔTP/ΔL

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

fixed inputs

A

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

long run

A

period of time during which all of the firm’s inputs are variable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

production function

A

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

short run

A

period of time during which at least one or more of the firm’s inputs is fixed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

variable inputs

A

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

profit

A

the difference between total revenues and total costs
Profit = Total Revenue – Total Cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

calculate Total Revenue

A

Total Revenue = Price x Quantity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

accounting profit

A

total revenues minus explicit costs, including depreciation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

economic profit

A

total revenues minus total costs (explicit plus implicit costs)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

explicit costs

A

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

implicit costs

A

opportunity cost of resources already owned by the firm and used in business, for example, expanding a factory onto land already owned

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
private enterprise
the ownership of businesses by private individuals
26
revenue
income from selling a firm’s product; defined as price times quantity sold
27
marginal cost
he additional cost of producing one more unit; mathematically, MC=ΔTC/ΔQ .
28
factor payments
what the firm pays for the use of the factors of production-includes raw materials, rent, wages and salaries, interest and dividends, and profit for entrepreneurship
29
fixed cost
cost of the fixed inputs; expenditure that a firm must make before production starts and that does not change regardless of the production level
30
total cost
the sum of fixed and variable costs of production
31
variable cost
cost of production that increases with the quantity produced; the cost of the variable inputs
32
average total cost
for any quantity of output, total cost divided by the quantity of output
33
average variable cost
for any quantity of output, variable cost divided by the quantity of output
34
profit margin
at a given level of output, the difference between price and average cost; also known as average profit average profit=price−average cost
35
production technologies
alternative methods of combining inputs to produce output
36
constant returns to scale
expanding all inputs proportionately does not change the average cost of production
37
economies of scale
the long-run average cost of producing output decreases as total output increases
38
diseconomies of scale
the long-run average cost of producing output increases as total output increases
39
leviathan effect
when a firm gets so large that it operates inefficiently, experiencing diseconomies of scale
40
long-run average cost (LRAC) curve:
shows the lowest possible average cost of production, allowing all the inputs to production to vary so that the firm is choosing its production technology
41
short-run average cost (SRAC) curve:
the average total cost curve in the short term; shows the total of the average fixed costs and the average variable costs
42
market structure
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
43
perfect competition
market structure where each firm faces many competitors that sell identical products so that no firm has any market power
44
price taker
firms in a perfectly competitive market; since no firm has any market power they must take the prevailing market price as given
45
marginal revenue
the additional revenue gained from selling one more unit of output marginal revenue = change in total revenue/change in quantity
46
profit-maximizing rule for a perfectly competitive firm
produce the level of output where marginal revenue equals marginal cost MR > MC → you’re still making a profit → make more! MR < MC → it costs more to make than you earn → stop!
47
If Price > ATC
Firm earns an economic profit
48
If Price = ATC
Firm earns zero economic profit
49
If Price < ATC
Firm earns a loss
50
break-even point:
the level of output where price just equals average total cost, so profit is zero, level of output where the marginal cost curve intersects the average cost curve at the minimum point of AC
51
short run outcomes
- price < minimum average variable cost, then firm shuts down - price > minimum average variable cost, then firm stays in business
52
shutdown point
level of output where the marginal cost curve intersects the average variable cost curve at the minimum point of AVC; if the price is below this point, the firm should shut down immediately
53
constant cost industry
an industry whose technology is such that there is no advantage to size; a large firm faces the same average costs as a small firm does.
54
entry
the long-run process of firms entering an industry in response to industry profits
55
exit:
the long-run process of firms reducing production and shutting down in response to industry losses
56
long-run equilibrium
where all firms earn zero economic profits producing the output level where P = MR = MC and P = AC
57
zero economic profits
a firm is covering all of its cost, including the opportunity costs of its capital; i.e. normal accounting profits
58
long-term outcomes
If price > ATC, the firm is making economic profit If price < ATC, the firm is losing money If price = ATC, the firm is breaking even
59
allocative efficiency
when the mix of goods being produced represents the mix that society most desires; at P = MC or lowest possible average cost
60
productive efficiency
given the available inputs and technology, it’s impossible to produce more of one good without decreasing the quantity of another good that’s produced; At minimum ATC
61
barriers to entry
the legal, technological, or market forces that may discourage or prevent potential competitors from entering a market
62
monopoly
a situation in which one firm produces all of the output in a market
63
copyright:
a form of legal protection to prevent copying, for commercial purposes, original works of authorship, including books and music
64
deregulation
removing government controls over setting prices and quantities in certain industries
65
intellectual property
the body of law including patents, trademarks, copyrights, and trade secret law that protect the right of inventors to produce and sell their inventions
66
legal monopoly
legal prohibitions against competition, such as regulated monopolies and intellectual property protection
67
natural monopoly
economic conditions in the industry, for example, economies of scale or control of a critical resource, that limit effective competition
68
patent
a government rule that gives the inventor the exclusive legal right to make, use, or sell the invention for a limited time
69
predatory pricing
when an existing firm uses sharp but temporary price cuts to discourage new competition
70
trade secrets
methods of production kept secret by the producing firm
71
trademark
an identifying symbol or name for a particular good and can only be used by the firm that registered that trademark
72
marginal profit
profit of one more unit of output, computed as marginal revenue minus marginal cost
73

Intro to Microeconomics (2 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions