RECITATION_MIDTERM Flashcards
What is the term for any economic activity that combines factors of production?
Production
What are the four factors of production?
Land, Labor, Capital, Entrepreneurship
What type of input can be changed in response to output changes?
Variable Input
What do we call the period when at least one factor of production is fixed?
Short Run
Which type of goods are necessary for daily living?
Essential or Necessity Goods
What is the average amount of output per unit of input called?
Average Product
What happens to total output when additional units of labor are added?
It increases but at a decreasing rate
What is the name of the curve that shows all combinations of factors producing a certain output?
Isoquant
Which type of goods are considered luxury items?
Luxury Goods
What term describes the additional cost of producing one more unit of a product?
Marginal Cost
What is the relationship between total product and variable inputs?
Total product increases with more variable inputs
What is consumer surplus?
The difference between what consumers are willing to pay and what they actually pay
Which goods have a price that is often zero due to their abundance?
Free Goods
What is the relationship between fixed costs and output?
Fixed costs do not vary with output
What does Maslow’s Hierarchy of Needs start with?
Physiological needs
What is the theory that suggests consumers will choose products to maximize satisfaction?
Consumer Choice
What do we call the extra output produced by one additional unit of input?
Marginal Product
What type of costs change as output changes?
Variable Costs
What does the term ‘diminishing returns’ mean?
Additional input results in smaller increases in output
What is the difference between total cost and fixed cost?
Total Cost = Fixed Cost + Variable Cost
What are services in economics?
Intangible economic activities
What type of costs remain constant regardless of production levels?
Fixed Costs
What do we call the satisfaction gained from consuming goods and services?
Utility
How can firms increase output in the short run?
By adding more variable inputs
What is the average total cost (ATC) formula?
ATC = Total Cost / Quantity
What type of costs are expenses that do not change as production levels change?
Fixed Costs
What is an example of a variable cost?
Labor or raw materials
What happens to average total cost as production increases, assuming constant fixed costs?
It generally decreases
What is the formula for total cost?
Total Cost = Fixed Cost + Variable Cost
What happens to marginal cost as production increases, typically?
It may increase due to diminishing returns
What does an increase in demand typically do to prices?
It raises prices
What is the purpose of isoquants in production theory?
To show combinations of inputs for a given output
What are public goods?
Goods that are non-excludable and non-rivalrous
What is an example of a fixed input in production?
Machinery or factory space
How do firms determine the optimal level of production?
By analyzing cost and revenue
What is the economic concept of scarcity?
Limited resources vs. unlimited wants
How does consumer behavior influence market prices?
Higher demand leads to higher prices
What does it mean if a product is inelastic?
Demand does not change much with price changes
What is the significance of elasticity in pricing?
It helps determine how much prices can be raised
How do subsidies affect supply?
They increase supply by reducing production costs
What is the relationship between total product and marginal product in the increasing phase?
Marginal product is increasing
How can technology impact production?
It can improve efficiency and reduce costs
What is the role of entrepreneurs in the economy?
They combine resources to create goods/services
What is a good definition of a market?
A place where buyers and sellers interact
What do you call the change in total revenue when one more unit is sold?
Marginal Revenue
What is the definition of labor productivity?
Output per labor hour
What is the principle of comparative advantage?
Specialization leads to increased efficiency
How do changes in consumer preferences affect market supply?
They can shift supply curves
What is meant by the term ‘monopoly’?
A market structure with a single seller
What are the characteristics of a perfectly competitive market?
Many buyers and sellers, identical products
