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44 Cards in this Set

  • Front
  • Back
goods and services
the makings of commodities
land, labor, and capital
goods and services
reward to entreprenuers for taking a risk and setting up a firm
can't cover its costs with its sales revenue
economic profit, pure profit
business profit minus oppurtunity cost (2 terms)
businesses that don't aim for profit (3)
providing a public service by gov


nonprofit orgs like building societies
every person produced everything he/she needed or wanted
division of labor
a way in which each worker specializes in a specific task
division of labor advantages (4)
many goods and services ->repetition increases skill and speed

everyone's abilities/talents are made full use of

time is saved- none wasted from switching activities

allows machinery, like robots painting cars
division of labor disadvantages and possible solutions(4)
work becomes boring- breaks and music

workers feel alienated/pride of completing something isn't there- allowing them do a greater task variety

too much dependency

products standardized and dull
mass production
production process that aims to use the fewest workers and the lowest cost possible to produce the largest amount of goods possible
time periods, runs (3)
momentary run- firm will not be able to increase production at all

short run- only able to increase labor, no land or capital

long run- firm employs more of all factors of production
total product
total output
average product
the average output a worker produces
marginal product
the amount the total product is raised by
law of diminishing returns
if one factor of production is fixed in supply and extra units of another factor are added, the extra output gained per extra unit will after a while diminish.
how to calculate marginal product
change in total product divided by change in number of workers
scale of production
the size of a firm
the site at which a good is produced
business unit that owns one or more plants
group of firms producing same good
average revenue how to calculate
total revenue divided by number of goods sold
break even point of production
when total cost = total revenue
marginal cost
cost of producing one more item
the decrease in value of the capital caused by wear and tear over time
optimum point of production, after that, costs increase again, why
average cost is at the lowest level possible

possible increase reasons: supplier runs out, law of diminishing returns
average cost curve graph
a bowl shape, optimum pt at lowest pt
increasing/decreasing/constant returns to scale
if a firm doubles its imput

...more than doubles its output, increasing

...less than doubles its output, decreasing

...doubles its output, constant
financial econs of scale (3)
borrow money from lotsa diff. sources, plus can raise more from selling stocks.

have lots of assets to offer lenders if they can't repay the loan

low risk- less fees
marketing econs of scale (4)
can buy in bulk and store them at discounts

can afford to employ specialist buyers

specialist sales staff

advertising spread over very large output
technical econs (5)
specialist workers and machines


large types of transport like juggernauts
risk bearing econs of scale (2)
buying from lotsa suppliers to prevent something happening to a supplier from affecting them too much

sell a variety of goods in case consumers stop buying one (diversification)
external econs of scale/ econs of concentration
skilled labor

ancillary firms- firms that'll help them will locate near by

small firm (3)
small share of market

personalized management

why small firms? (3)
small market

can cooperate

gov helps them
small market because...
local- only one for miles around

caters to a specialized good/service

high priced luxury items

personal service

supplies component parts to large firms
why nationalization
control natural monopolies


protect employment

maintain public service where they would operate at a loss
why privatization
improve quality and lower prices cuz of competition

wider variety

sale of shares raises revenue for gov. to lower taxes

owning shares- ppl still get a say in company
market failure
fails to make best use of resources because of external costs
perfectly competitive market (4)
homogeneous product

buyers and sellers don't affect price

perfect info

no barriers of entry or exit
perfect competition, why perfect?
low prices


consumer sovereignity
monopoly (6)
no competition

abnormal profits

price makers

create barriers to entry

imperfect info

non homogeneous products