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21 Cards in this Set

  • Front
  • Back
basic economic principles...

_____ make purposeful choices with scare resources.

___ maximize utility..subject to a budget restraint relating expenditure to income

____ maximize profits...subject to a production function relating output to input


___= an organization that produces goods or services.

- In the US, about 80% of all firms are _____, with one owner, or ____, with only a few owners who usually manage the firm.

A _____ is unlike sole proprietorship or partnership in that the managers are usually somewhat removed from the owners.
sole proprietorship


A supply curve for a _____ firm tells us the quantity of a good that that firm will produce at different prices
-to find, the firm looks at the price of a good it is selling and then decides how much to produce
___= any firm that takes the markt price as given; this firm cannot affect the market price bc the market is competetive
- firm cannot influence the market price, but instead has to decide how much to produce and sell at the given market price of the goods
price taker
___= a market in which a single firm cannot affect the market price
-market where no firm has the power to affect the market price of a good
-requires that several firms must be competing against each other
competitive market
The exact opposit of a competitve market is a market in which there is only one firm, in which case the firm is called a _____. It is a price-maker that can dictate a price, not a price taker
___= total revenue received from selling the product, minus the total costs of producing the product
= total revenue minus total costs
When profits are ____, total revenue is less that total costs and the firm runs a loss.

When profits are ____, total revenue is equal to total costs, and the firm is breaking even.

-firms goal is to maximize profits;the firm decides on the quantity of production that will make profits as high as possible

____= the total number of dollars the firm receives from people who buy its product
-it is the price per unit times the quantity the firm sells
total revenue

TR= Price x quantity
___= the sum of all costs incurred in producing goods or services
-includes workers salaries, rent
total costs
_____ analysis- because the time is too short to change the other factors of production, such as land, only labor can be changed.
short run analysis
In _____ analysis, in which other factors of production such as the size of a pumpkin patch can change as well as labor
long run analysis
____= a relationship that shows the quantity of output for any given amount of input
-tells how much is produced for each amt of labor input, given a fixed amt of land imput
production function
_____= increase in production that comes from an additional unti of labor
marginal product of labor
Another term for declining marginal product is ____________.
-occurs when some inputs to production, such as land or machines, are fixed
-ex; hiring more workers is initially very helpful, bc the workers have tasks, but as more and more workers are employed on a given amt of land, there are fewer tasks for each to do
-situation i which the increase in output to a unit increase in labor declines with incresaing labor output; a decreasing marginal product of labor
dimishing returns to labor
___= costs of production that vary with the quantity of production

___ costs stay the same and must be paid no matter how many products are produced, or even if none at all

___= the change in total costs due to a one-unit change in quantity produced
-increase in total costs associated with an additional unit of production
variable cost

fixed cost

marginal cost
__= an assumption that firms try to achieve the highest possible level of profits
-total revenue minus total costs, given their production function
profit maximization
___= the change in total revenue to to a one-unit increase in quantity sold
-additional,extra revenue that results from producing/selling one more unit of output
marginal revenue
The key condition for profit maximization for a firm: the firm will choose a quantity to produce so that marginal revenue _____ marginal cost
The ____ can be obtained by adding up the supply curves of all the INDIVIDUAL firms in the market
market supply curve
__= difference btw the margnial cost of an item and price received for it
-difference btw the price received by a firm for an additional item sold and the margnial cost of the items' production
-for the market as a whole, it is the sume of all individuals firms' producer surpluses, or the area above the market supply curve and below market price
-measure of how much a producer gains from the market
producer surplus