Week 1 Flashcards

1
Q

What is microeconomics?

A

The study of individual consumers, business firms, and markets that contribute to the understanding of business practices and tactics.

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2
Q

What is marginal analysis?

A

Evaluating additional costs and benefits of decisions.

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3
Q

What is industrial organization?

A

A sub field of microeconomics that focuses on behavior & structure of firms and industries.

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4
Q

What is opportunity cost?

A

What a firms owners must give up to use resources to produce goods and services.

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5
Q

What are market - supplied resources?

A

Resources owned by others and hired, rented, or leased.

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6
Q

What are owner-supplied resources?

A

Owned and used by the firm.

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7
Q

What is the total economic cost?

A

Sum of the opportunity cost of both market-supplied resources and owner-supplied resources.

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8
Q

What are explicit costs?

A

Monetary opportunity costs of using market-supplied resources.

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9
Q

What are implicit costs?

A

No monetary opportunity costs of using owner-supplied resources.

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10
Q

What is the formula for total economic cost?

A

Explicit + implicit costs = total economic cost

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11
Q

What are the 3 types of implicit costs?

A
  1. Opportunity cost of cash.
  2. Opportunity cost of using land or capital.
  3. Opportunity cost of owner’s time spent.
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12
Q

What is the formula for economic profit?

A

Total revenue - total economic cost.

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13
Q

What is accounting profit?

A

Total revenue - explicit costs.

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14
Q

What is risk premium?

A

An increase in the discount rate to compensate investors for uncertainty about future profits.

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15
Q

What is a complete contract?

A

An employment contract that protects owners from every possible deviation by managers from value-maximizing decisions.

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16
Q

What are hidden actions?

A

Actions or decisions taken by managers that cannot be observed by owners for any feasible amount of monitoring effort.

17
Q

What is a price-taking firm?

A

A firm that cannot set the prices of its product.

18
Q

What is a price-setting firm?

A

A firm that can set the price of its product.

19
Q

What is a market?

A

Any arrangement through which buyers and sellers exchange anything of value.

20
Q

Do markets reduce transaction costs?

Yes or no?

A

Yes.

21
Q

What is a market structure?

A

Market characteristics that determine the economic environment in which a firm operates.

22
Q

What is an Oligopoly?

A

A market with few firms who are almost identical in products and ease of entry in low.

23
Q

What is a monopolistic competition market?

A

Many firms with differentiated products.

24
Q

What is a strategic decision?

A

A decision that does not consider the current market conditions as fixed, but rather attempts to shape or alter the circumstances under which a firm and its rivals compete.