Final Microeconomics

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Innovation

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The successful introduction and adoption of a new product or process; the economic application of inventions and marketing techniques.

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Investment

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The purchase, construction, or development of capital resources, including both nonhuman capital and human capital. Investments increase the supply of capital.

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Licensing

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A requirement that one obtains permission from the government in order to perform certain business activities or work in various occupations.

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Marginal Benefit

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The maximum price a consumer will be willing to pay for an additional unit of a product. It is the dollar value of the consumer's marginal utility from the additional unit, and therefore it falls as consumption increases.

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Marginal product

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The increase in the total product resulting from a unit increase in the employment of a variable input. Mathematically, it is a ratio of the change in total product to the change in the quantity of the variable input.

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Marginal Revenue (MR)

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The incremental change in total revenue derived from the sale of one additional unit of a resource.

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Market Power

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The ability of a firm that is not a pure monopoly to earn persistently large profits, indicating that it has some monopoly power. Because the firm has few (or weak) competitors, it has a degree of freedom from vigorous competition.

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Money Rate of Interest

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The rate of interest in monetary terms that borrowers pay for borrowed funds. During periods when borrowers and lenders expect inflation, the money rate of interest exceeds the real rate of interest.

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Monopolistic competition

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A term often used by economists to describe markets characterized by a large number of sellers that supply differentiated products to a market with low barriers to entry. Essentially, it is an alternative term for a competitive price-searcher market.

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Monopoly

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A market structure characterized by (1) a single seller of a well defined product for which there are no good substitutes and (2) highbarriers to entry of any other firms into the market for that product.

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Natural monopoly

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A market situation in which the average costs of production continually decline with increased output. In a natural monopoly, the average costs of production will be lowest when a single, large firm produces the entire output demanded by the marketplace.

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Non-pecuniary jobcharacteristics

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Working conditions, prestige, variety, location, employee freedom and other nonwage characteristics of a job that influence how an employee will evaluate the job

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Nonrenewable resources

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Those that are not created or renewed naturally at a significant rate.

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Oligopoly

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A market situation in which a small number of sellers constitutes the entire industry. It is competition among few.

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Positive economics

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The scientific study of "what is" among economic relationships.

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Poverty Threshold income level

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The level of money income below which a family is considered to be poor. It differs according to family characteristics and is adjusted when a consumer prices change.

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Present Value (PV)

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The current worth of future income after it is discounted to reflect the fact that revenues in the future are valued less highly than revenues now.

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Price discrimination

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a practice whereby a seller charges different consumers different prices for the same product or service.

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Price searchers

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Firms that face downwardsloping demand curve for their product. The amount the firm is able to sell is inversely related to the price it charges.

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Price Takers

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Sellers who must take the market price in order to sell their product. Because each price takers output is small relative to the total market, price takers can sell all their output at the market price, but they are unable to sell any of their output at a price higher than market price.

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Rationing

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Allocating a limited supply of a good or resource among people who would like to have more of it. When price performs the rationing function, the good or resources is allocated to those willing to give up the most "other things" in order to get it.

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Resource mobility

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The ease with which factors of production are able to move among alternative uses. Resources that can easily be transferred to a different use or location are said to be highly mobile. Resources with few alternative uses are immobile.

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Samaritan Dilemma

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The dilemma that occurs when assisting low-income citizens with transfers reduces the opportunity cost of choices that lead to poverty. Providing income transfers to the poor and discouraging behavior that leads to poverty are conflicting goals.

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Saving

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The portion of after-tax income that is not spent on consumption. saving is a "flow" concept.

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Sunk-Cost

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Costs that have already been incurred as a result of past decisions. Historical costs.

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Tarrif

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A tax levied on imported goods.