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Unit III - Microeconomics
Chapters 7-9
44
Economics
12th Grade
11/24/2009

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Term
business firm
Definition
an organization that uses resources to produce goods and services that are sold to consumers, firms, or the government.
Term
shirking
Definition
the behavior of a worker that is putting forth less than the agreed-to effort
Term
sole proprietorship
Definition
a business that is owned by one individual who makes all business decisions, receives all the profit or losses, and is legally responsible for debts of the firm
Term
partnership
Definition
a business owned by two or more co-owners, called partners, who share profits and are legally responsible for debts
Term
stockholder
Definition
a person who owns shares of stock in a corporation. basically the owners of the corporation.
Term
corporation
Definition
a legal entity that can conduct business in its own name in the same way that an individual does.
Term
asset
Definition
anything of value to which the firm has legal claim
Term
limited liability
Definition
a condition in which an owner of a business firm can lose only the amount he or she has invested
Term
board of directors
Definition
an important decision-making group in a corporation. It decides corporate policies and goals, among other things.
Term
franchise
Definition
a contract by which a firm lets a person or group use its name and sell its goods in exchange for certain payments and requirements
Term
franchiser
Definition
the entity that offers a franchise
Term
franchisee
Definition
the person or group that buys a franchise
Term
which two firms have unlimited liability?
Definition
sole proprietorships and partnerships
Term
Nader view
Definition
businesses have ethical and social responsibilities, treat employees well
Term
Friedman view
Definition
no using government to stifle competition, earn as much as possible by selling the public what it wants to buy.
Term
fixed cost
Definition
a cost that doesn't change regardless of the fluctuation in quantity
Term
variable cost
Definition
a cost that fluctuates along with the quantity produced
Term
total cost
Definition
the sum of fixed cost and variable cost
Term
average total cost
Definition
the total cost divided by the quantity of output
Term
marginal cost
Definition
the cost of producing one additional good, found by dividing the change in total cost by the change in quantity
Term
marginal revenue
Definition
the revenue from selling an additional unit of a good; the change in total revenue that results from selling an additional unit of output
Term
law of diminishing marginal returns
Definition
a law that states that if additional units of one resource are added to another resource in fixed supply, eventually the additional output will decrease
Term
market structure
Definition
the setting in which a seller finds itself, defined by characteristics such as number of sellers, product produced and sold, how easy/difficult it is for new firms to enter the market
Term
perfectly competitive market
Definition
1) many buyers & sellers, 2) identical goods being sold, 3)all relevant information about buying/selling activities is available to buyers/sellers, and 4) easy entry into/out of the market
Term
price taker
Definition
a seller that can sell all its output at the equilibrium price but none at another price
Term
monopolistic market
Definition
1) a single seller, 2) a product with no close substitutes, and 3) extremely high entry barriers
Term
barrier to entry
Definition
anything prohibiting a firm from entering a market
Term
price searcher
Definition
a seller that can sell some of its output at various prices
Term
public franchise
Definition
a right granted to a firm by government that permits the firm to provide a particular good or service and excludes all others from doing so
Term
natural monopoly
Definition
a firm with such a low average total cost that only it can survive in the market
Term
antitrust law
Definition
legislation passed for the stated purpose of controlling monopoly power and preserving and promoting competition
Term
monopolistic competitive market
Definition
1) many buyers/sellers, 2) production/sale of slightly differentiated products, and 3)easy entry/exit from market
Term
oligopolistic market
Definition
1) few sellers, 2)production/sale of identical or slightly differentiated products, and 3) significant barriers to entry
Term
cartel agreement
Definition
an agreement that specifies how the firms that entered into the agreement will act in a coordinated way to reduce the competition among them
Term
price discrimination
Definition
practice by which a seller charges different prices to different buyers for the product it sells when the price differences do not reflect cost differences
Term
wage rate
Definition
price of labor
Term
derived demand
Definition
a demand that is the result of some other demand
Term
minimum wage law
Definition
a federal law that specifies the lowest hourly wage rate that can be paid to workers
Term
labor union
Definition
an organization that seeks to increase wages and improve working conditions
Term
closed shop
Definition
an organization that hires only union workers
Term
Taft-Hartley Act
Definition
made closed shops illegal and gave states the right to pass right-to-work laws, which prohibit employers from establishing union membership as a condition of employment
Term
union shop
Definition
an organization that requires employees to join the union within a certain time period after being hired
Term
strike
Definition
a work stoppage called by union members to put pressure on an employer
Term
right-to-work law
Definition
a state law that prohibits the practice of requiring employees to join a union in order to work
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