Economics Test 2

Front 1

Total Cost

Back 1

the market value of the inputs a firm uses in production

Front 2

Profit

Back 2

total revenue - total costs

Front 3

Total Revenue (in a market)

Back 3

the amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold

Front 4

Total Revenue (for firm)

Back 4

the amount a firm receives for the sale of its outputs

Front 5

Explicit Costs

Back 5

input costs that require an outlay of money by the firm

Front 6

Implicit Costs

Back 6

input costs that do not require an outlay of money by the firm

Front 7

Economic Profit

Back 7

total revenue - total costs

Front 8

Accounting Profit

Back 8

total revenue - total explicit costs

Front 9

Production Function

Back 9

the relationship between the quantity of inputs used to make a good and the quantity of output of that good

Front 10

Marginal Product

Back 10

the increase in output that arises from an additional unit of input

Front 11

Henry George

Back 11

said that supply on land is inelastic so there should be a single tax on land therefore the burden of the tax would be on the owners of the land and the tax would have no dead weight loss

Front 12

Diminishing Marginal Product

Back 12

the marginal product of an input declines as the quantity of the input increases

Front 13

Fixed Costs

Back 13

costs that do not vary with the quantity of output produced

Front 14

Variable Costs

Back 14

costs that vary with the quantity of output produced

Front 15

Average Total Costs

Back 15

total cost/quantity of output

Front 16

Average Fixed Cost

Back 16

fixed cost/quantity of output

Front 17

Average Variable Cost

Back 17

variable cost/quantity of output

Front 18

Marginal Cost

Back 18

the increase in total cost that arises from an extra unit of production

Front 19

Efficient Scale

Back 19

the quantity of output that minimizes average total cost

Front 20

Economies of Scale

Back 20

long-run average total costs fall as the quantity of output increases

Front 21

Diseconomies of Scale

Back 21

long-run average total cost rises as the quantity of output increases

Front 22

Constant Returns to Scale

Back 22

the property whereby long-run average total cost stays the same as the quantity of output changes

Front 23

Competitive Market

Back 23

a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker

Front 24

Average Revenue

Back 24

total revenue/quantity sold

Front 25

Marginal Revenue

Back 25

the change in total revenue from an additional unit sold

Front 26

Sunk Cost

Back 26

a cost that has already been committed and cannot be recovered

Front 27

Monopoly

Back 27

the sole seller of a product without a close substitute

Front 28

Natural Monopoly

Back 28

arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms

Front 29

Price Discrimination

Back 29

the business practice of selling the same good at different prices to different customers

Front 30

Tragedy of the Commons

Back 30

a parable the illustrates why a common resources are used more than is desireable from the standpoint of society as a whole

Front 31

Cost-Benefit Analysis

Back 31

a study that compares the costs and benefits to society of providing a public good

Front 32

Free Rider

Back 32

a person who receives the benefit of a good but avoids paying for it

Front 33

Public Goods

Back 33

goods that are neither excludable or rival in consumption

Front 34

Private Goods

Back 34

goods that are both excludable and rival in consumption

Front 35

Rivalry in consumption

Back 35

the property of a good whereby one person's use diminishes other people's use

i.e. common resources

Front 36

Excludability

Back 36

the property of a good whereby a person can be prevented from using it

i.e. natural monopolies

Front 37

Transaction costs

Back 37

the costs that parties incur in the process of agreeing to and following through on a bargain

Front 38

Coase Theorem

Back 38

the proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own

Front 39

Corrective Tax

Back 39

a tax designed to induce private decision makers to take account of the social costs that arise from a negative externality

Front 40

Internalizing the Externality

Back 40

altering incentives so that people take account of the external effects of their actions

Front 41

Externality

Back 41

the uncompensated impact of one person's actions on the well-being of a bystander

Front 42

Tariff

Back 42

a tax on goods produced abroad and sold domestically

Front 43

World Price

Back 43

the price of a good that prevails in the world markey for that good

Front 44

Deadweight Loss

Back 44

the fall in total surplus that results from a market distortion, such as tax