Term
| value of the marginal product (VMP) |
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Definition
VMP of an input is the marginal product of that input times the market price of the related output. a/k/a "marginal revenue product" (397, 18) |
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Term
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Definition
inputs (e.g., land, labor, capital) used to produce goods/services. Demand for a factor of prod. is a "derived demand" because its demand is derived from a decision to produce a good/service (394, 18) |
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Term
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Definition
relationship between qty. of inputs used in production and qty. of outputs from production
(396, 18) |
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Term
| marginal product of labor (MPL) |
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Definition
increase in amount of output from one additional unit of labor. MPL = ΔQ/ΔL = Δoutputs / Δlabor (396, 18) |
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Term
| diminishing marginal product |
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Definition
property whereby the marginal product of an input declines as qty. of the input increases
(396, 18) |
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Term
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Definition
| study of how people make decisions regarding the allocation of resources over time and the handling of risk (597, 27) |
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Term
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Definition
amount of money today that would be needed, using prevailing interest rates, to produce a given future amount of money
(598, 27) |
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Term
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Definition
risk that affects all companies in a stock market. it cannot be eliminated by diversification
(604, 27) |
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Term
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Definition
risk that affects only a single company. it can be eliminated with diversification.
(604, 27) |
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Term
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Definition
reduction of risk achieved by replacing a single risk with a large number of smaller, unrelated risks
(603, 27) |
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Term
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Definition
| a dislike of uncertainty (600, 27) |
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Term
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Definition
accumulation of a sum of money in (e.g.) a bank account, with interest received being re-invested and kept in account
(598, 27) |
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Term
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Definition
amount of money in the future that a given amount of money today will yield, given prevailing interest rates. e.g., future value of $100 in N years at interest rate R: (1+R)^N times $100
(598, 27) |
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Term
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Definition
study of a company's accounting statements and future prospects to determine its value. (this is what stock analysts do)
(606, 27) |
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Term
| efficient market hypothesis |
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Definition
the theory that asset prices reflect all publicly available information about the value of an asset
(606, 27) |
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Term
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Definition
the description of asset prices that rationally reflect all available information. i.e., stock prices change only when publicly available information changes.
(607, 27) |
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Term
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Definition
the path of a variable whose changes are impossible to predict. i.e., if someone could in fact predict the change of (e.g.) a stock price, then that person has access to non-publicly available information, or else the stock price would already have changed.
(607, 27) |
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Term
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Definition
the uncompensated impact of one person's actions on the well-being of a bystander; could be positive or negative
(204, 10) |
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Term
| internalizing the externality |
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Definition
altering incentives so that people take account of the external effects of their actions; e.g., a tax on pollution
(207, 10) |
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Term
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Definition
the proposition that if private parties can bargain without cost over the allocation of resources, then they can solve the problem of externalities on their own
(210, 10) |
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Term
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Definition
the costs that parties incur in the process of agreeing to and following through on a bargain
(211, 10) |
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Term
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Definition
| a tax designed to induce private decision-makers to take account of the social costs that arise from a negative externality (213, 10) |
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Term
excludability (n) excludable (adj) |
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Definition
| the property of a good whereby a person can be prevented from using it (224, 11) |
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Term
rivalry in consumption (n) rival in consumption (adj) |
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Definition
| the property of a good whereby one person's use diminishes other people's use of it (224, 11) |
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Term
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Definition
goods that are both excludable and rival in consumption
e.g., ice-cream cones, clothing, congested toll roads
(224, 11) |
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Term
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Definition
goods that are neither excludable nor rival in consumption
e.g., tornado siren, national defense, uncongested non-toll roads
(224, 11) |
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Term
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Definition
goods that are rival in consumption but not excludable
e.g., fish in the ocean, the environment, congested non-toll roads
(225, 11) |
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Term
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Definition
(1) monopolies that come about because a single producer is more efficient than many producers;
(2) markets in which goods are excludable but not rival in consumption
e.g., fire protection, cable TV, uncongested toll roads
(???, 11 & 15) |
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Term
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Definition
a person who receives the benefit of a good but avoids paying for it
(226, 11) |
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Term
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Definition
a study that compares the costs and benefits to society of providing a public good; its goal is to estimate the total costs/benefit of the project to society at large
(229, 11) |
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Term
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Definition
a parable that illustrates why common resources get used more than is desirable from the standpoint of society as a whole
(231, 11) |
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Term
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Definition
a firm that is the sole seller of a product without any close substitutes
(312, 15) |
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Term
| the three reasons that other firms may not enter a monopolized market |
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Definition
(1) a key resource is owned by a single firm;
(2) the government has granted a single firm the right to be a monopoly;
(3) the costs of production make a single producer more efficient than many producers (a "natural monopoly")
(312, 15) |
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Term
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Definition
the business practice of selling the same good at different prices to different customers; a firm must have some market power to price-discriminate
(329, 15) |
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