Econ 208 Chapter 7 Terms

Front 1

List the different types of firms

Back 1

single proprietorship
ordinary partnership
limited partnership
corporation
state-owned enterprise (crown corp.)
transnational corporations (TNCs)

Hint 1

there are 6 of them bad boys

Front 2

what are the properties of a single proprietorship?

Back 2

single owner who is personally responsible for the firm's actions and debts

Front 3

what are the properties of a ordinary partnership?

Back 3

two or more joint owners, each of whom are personally responsible for the firm's actions and debts

Front 4

what are the properties of a limited partnership?

Back 4

a firm with two classes of owners: general partners, who take part in managing the firm and are personally liable for all the firm's actions and debts, and limited partners, who take no part in the management of the firm and risk only the money that they have invested

Hint 4

two classes of owners

Front 5

what are the properties of a corporation?

Back 5

the firm is publicly owned through shares, stocks, and equity

Front 6

what are the properties of a state-owned enterprise?

Back 6

firm is owned by the government. in canada - called crown corporations

Front 7

what are the properties of a transnational corporation?

Back 7

firms that have operations in more than one country. also called multinational enterprises (MNEs)

Front 8

Define "dividends"

Back 8

profits paid out to shareholders of a corporation. AKA: distributed profits.

Front 9

Define "bonds"

Back 9

A debt instrument carrying a specified amount and schedule of interest payments and (usually) a date for redemption of its face value

Front 10

What are the two forms of financial capital used by a firm?

Back 10

Equity and Debt

Front 11

What are two assumptions we can make with firms in a perfectly competitive market?

Back 11

Profit maximizing
Each firm is seen as a single decision making unit

Front 12

What are the 4 types of inputs in production?

Back 12

intermediate products
inputs provided directly by nature
inputs provided by people (labour)
land

Hint 12

IP
N
L
L

Front 13

Define "intermediate products" and give an example

Back 13

All products that are outputs of one level of production, used as inputs for a higher level.
ex. Steel (it is mined and purified, then is used as a input to make cars)

Front 14

Define "production function"
what is it's production function?

Back 14

A functional that relates inputs used by a firm to outputs

Q = f(L,K)
where Q is the flow of output, K is the flow of capital services, and L is the flow of labour services

Front 15

Define "economic profit"

Back 15

revenue - (implicit + explicit) costs
AKA: excess/pure profit

Front 16

Define "implicit costs"

Back 16

costs that are not taken into account by an accountant like the opportunity cost of the owner's time and capital.

Front 17

Define "explicit costs"

Back 17

costs that actually involve a purchase of a good or service by a firm. (hiring workers, renting equipment)

Front 18

Define "accounting profits"

Back 18

revenue - explicit costs

Front 19

What characteristics define "short run"?

Back 19

a length of time over which some factors of production (typically capital) are fixed

Front 20

What characteristics define "long run"?

Back 20

a length of time over which all factors of production are changing, but technology is fixed

Front 21

What characteristics define "very long run"?

Back 21

a length of time over which all factors of production are varied (including technology)

Front 22

Define "fixed factor"

Back 22

An input whose quantity cannot be changed in the short run

Front 23

Define "variable factor"

Back 23

An input whose quantity can be changed in the short run

Front 24

Define "total product"

Back 24

TP is the total amount of output produced by a firm during some period of time

Front 25

Define "average product"

Back 25

AP is the total product divided by the number of units of the variable factor used in its production

AP = TP/L

Front 26

Define "marginal product"

Back 26

MP is the change in total output that results from using one more unit of a variable factor

MP = (delta)TP / (delta)L

Front 27

What is the Law of Diminishing Returns?

Back 27

for each additional unit of input, marginal returns become less and less

Front 28

Define "total cost"

Back 28

TC is the total cost of producing any given level of output. it can be divided into total fixed cost and total variable cost

TC = TFC + TVC

Front 29

Define "total fixed cost"

Back 29

TFC includes all costs of production that do not vary with the level of output

Front 30

Define "total variable cost"

Back 30

TVC are total costs of production that vary directly with the level of output

Front 31

Define "average total cost"

Back 31

ATC is the total cost of producing a given output divided by the number of units of output. It can also be calculated as the sum of average fixed costs and average variable costs. AKA: unit costs or average cost

ATC = TC/Q = AFC + AVC

Front 32

Define "average fixed cost"

Back 32

The AFC's are the total fixed costs divided by the number of units of output

AFC = TFC/Q

Front 33

Define "average variable cost"

Back 33

The AVC's are the total variable costs divided by the number of units of output

AVC = TVC/Q

Front 34

Define "marginal cost"

Back 34

the MC is the increase in total cost resulting from increasing output by one unit. AKA: incremental cost

MC = (delta)TC / (delta)Q