Vocabulary: Unit Four Flashcards
Proprietorship
Sole owner
Partnership
Two or more owners
Corporation
A company with multiple owners; legally separate from the owners
Dividends
A share of the corporation’s profits
Stock
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
Production function
The maximum quantity the firm can produce with a given combination of resources
Cost function
The relationship between output and the cost of producing that output
Explicit costs
Opportunity costs of the resources that the firm pays for with cash
Implicit costs
The opportunity costs of using the firm’s resources that are provided by the firm’s owners without a cash payment
Total revenue
The price of the product multiplied by the total quantity sold
Profit
Total revenue minus total costs
Normal profit
The accounting profit earned when all resources used earn their opportunity cost; “breaking even”
Economic profit
The income business owners receive after explicit and implicit costs have been subtracted from the total revenue
Fixed resource
A resource that can’t be varied in the short run
Variable resource
A resource that can be varied in order to increase or decrease the level of output in the short run