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Chapter 10 Parkin & Bade
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20
Economics
Undergraduate 1
12/08/2015

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Term
firm
Definition
Each _______ is an institution that hires factors of production and organizes those factors to produce and sell goods and services.
Term
economic profit
Definition
______________is equal to total revenue minus total cost, with total cost measured as the opportunity cost of production .
Term
implicit rental rate
Definition
When a firm uses its own capital, it implicitly
rents it from itself. In this case, the firm’s opportunity cost of using the capital it owns is called the ___________ of capital.
Term
economic depreciation
Definition
________________ is the fall in the market value of a firm’s capital over a given period.
Term
normal profit
Definition
The return to entrepreneurship is profit, and the profit that an entrepreneur earns on average is called ________________ .
Term
technology
Definition
A _____________ is any method of producing a good or service.
Term
technological efficiency
Definition
____________occurs when the firm produces a given output by using the least amount of inputs.
Term
economic efficiency
Definition
____________occurs when the firm produces a given output at the least cost.
Term
command system
Definition
A _______________- is a method of organizing production that uses a managerial hierarchy. Commands pass downward through the hierarchy, and information passes upward.
Term
incentive system
Definition
An __________ is a method of organizing production that uses a market-like mechanism inside the firm.
Term
perfect competition
Definition
___________ arises when there are many firms, each selling an identical product, many buyers, and no restrictions on the entry of new firms into the industry.
Term
monopolistic competition
Definition
___________ is a market structure in which a large number of firms compete by making similar but slightly different products.
Term
product differentiation
Definition
Making a product slightly different from the product of a competing firm is called ______________.
Term
oligopoly
Definition
_________ is a market structure in which a small number of firms compete
Term
monopoly
Definition
__________ arises when there is one firm, which produces a good or service that has no close substitutes and in which the firm is protected by a barrier preventing the entry of new firms.
Term
four-firm concentration ratio
Definition
The _________ is the percentage of the value of sales accounted for by the four largest firms in an industry.
Term
Herfindahl-Hirschman Index (HHI)
Definition
The ________ the square of the percentage market share of each firm summed over the largest 50 firms (or summed over all the firms if there are fewer than 50) in a market.
Term
transactions costs
Definition
__________ are the costs that arise from finding someone with whom to do business, of reaching an agreement about the price and other aspects of the exchange, and of ensuring that the terms of the agreement are fulfilled.
Term
economies of scale
Definition
When the cost of producing a unit of a good falls as its output rate increases, ___________ exist.
Term
economies of scope
Definition
A firm experiences ___________ when it uses specialized (and often expensive) resources to produce a range of goods and services.
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