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Details Title: Chapter 7 Key Terms Description: Vocabulary for Chapter 7 of CASE & FAIR Total Flash Cards: 22 Created: 02/18/2007 16:52:31	To study from this set of flash cards, or to create your own your own study flash cards, register HERE. If you are already a registered user, CLICK HERE.
Cards Term firm Definition an organization that comes into being when a person or a group of people decides to produce a good or service to meet a perceived demand. most firms exist to make a PROFIT. Term perfect competition Definition industry structure in which there are (1) Many firms with no control over prices (2) Production of identical / homogeneous products (3) Free entry / exit Term homogeneous products Definition undifferentiated products; products that are identical to, or indistinguishable from, one another. Term profit (economic profit) Definition difference between total revenue and total cost Term total revenue Definition amount received from the sale of the product (quantity x price) Term total cost Definition (1) out of pocket costs (2) normal rate of return on capital (3) opportunity cost of each factor of production Term out-of-pocket costs Definition explicit costs, accounting costs Term economic costs Definition full opportunity cost of every input; implicit costs Term 3 Decisions All Firms Must Make Definition (1) how much output to apply (2) which production technology to use (3) how much of each input to demand Term normal rate of return Definition rate of return on capital that is just sufficient to keep owners and investors satisfied. (for relatively risk-free firms, it should be nearly the same as the interest rate on risk-free government bonds) Term short run Definition period of time when: (1) firm is operating under a fixed scale (fixed factor) of production (2) firms can neither enter / exit an industry Term long run Definition period of time when (1) there are no fixed factors of production––firms can increase / decrease scale of operation (2) new firms can enter and exit the industry Term basis of decision making for firms Definition (1) market price of output (2) techniques of production that are available (3) prices of inputs Term optimal method of production Definition production method that minimizes cost Term production technology Definition quantitative relationship between inputs and outputs Term production technology Definition quantitative relationship between inputs and outputs Term labor intensive technology Definition technology that relies heavily on human labor instead of capital Term capital-intensitve technology Definition technology that relies heavily on capital instead of human labor Term production function (total product function) Definition numerical / mathematical expression of a relationship between inputs and outputs. it shows units of total product as a function of units of inputs. Term marginal product Definition additional output that can be produced by adding one more unit of a specific input, ceteris parabis Term law of diminishing returns Definition when additional units of a variable input are added to fixed inputs after a certain point, the marginal product of the variable input declines. Term average product Definition average amount produced by each unit of a variable factor of production