Vocabulary: Unit Four Flashcards

1
Q

Proprietorship

A

Sole owner

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2
Q

Partnership

A

Two or more owners

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3
Q

Corporation

A

A company with multiple owners; legally separate from the owners

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4
Q

Dividends

A

A share of the corporation’s profits

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5
Q

Stock

A

Shares in the company in exchange for the money invested; gives owners a right to vote on members of the Board of Directors and the possibility of dividends

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6
Q

Production function

A

The maximum quantity the firm can produce with a given combination of resources

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7
Q

Cost function

A

The relationship between output and the cost of producing that output

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8
Q

Explicit costs

A

Opportunity costs of the resources that the firm pays for with cash

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9
Q

Implicit costs

A

The opportunity costs of using the firm’s resources that are provided by the firm’s owners without a cash payment

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10
Q

Total revenue

A

The price of the product multiplied by the total quantity sold

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11
Q

Profit

A

Total revenue minus total costs

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12
Q

Normal profit

A

The accounting profit earned when all resources used earn their opportunity cost; “breaking even”

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13
Q

Economic profit

A

The income business owners receive after explicit and implicit costs have been subtracted from the total revenue

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14
Q

Fixed resource

A

A resource that can’t be varied in the short run

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15
Q

Variable resource

A

A resource that can be varied in order to increase or decrease the level of output in the short run

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16
Q

Short run

A

The period when at least one of the firm’s resources is fixed

17
Q

Long run

A

The period when all resources used by the firm can be varied

18
Q

Fixed costs

A

Production costs independent of the level of output that don’t change in the short run

19
Q

Variable costs

A

Production costs that increase as the level of output increases

20
Q

Marginal

A

Incremental; adding or subtracting one more unit

21
Q

Marginal product

A

The additional output that can be produced by adding one more unit of a specific input

22
Q

Increasing marginal returns

A

The marginal product increases due to the use of one additional unit of a resource

23
Q

Diminishing marginal returns

A

A natural function of the production process

24
Q

Law of diminishing returns

A

In the production process, there is a point where an increase in a variable factor of production results in a decline in the additional production derived from one more unit of hat particular factor

25
Q

Marginal cost

A

The additional cost when one additional unit of output is added; inversely related to marginal product

26
Q

Total cost function

A

A summary picture of the firm’s short run cost structure

27
Q

Least cost of production

A

The point where the short-run average cost curve and the long run average cost curve intersect

28
Q

Economies of scale

A

Experienced when a firm grows and simultaneously experiences a reduction in cost per unit

29
Q

Constant returns to scale

A

The average total cost neither increases or decreases with the change in the firm’s output

30
Q

Diseconomies of scale

A

Experienced when a firm grows and simultaneously experiences an increase in cost per unit

31
Q

Accounting profit

A

Total revenue minus only explicit costs

32
Q

Diminishing marginal returns

A

Diminishing returns or diminishing marginal product; implies that costs are increasing per unit produced