Econ 165 test 3

  1. Net Benefit
    The result when total cost is subtracted from total benefit.
  2. Explicit Costs
    Payments that a business makes to acquire factors of production such as labor, raw materials and machinery. They are direct payments or actual dollar outlays. Ex: monthly paychecks to employees, liability insurance payments, and checks to the local paper for an ad.
  3. Implicit Costs
    The opportunity costs to business owners from using their resources in the business rather tan in an alternative opportunity; must be recovered to keep the business in operation; normal profit. These are not direct payments for inputs but are opportunity costs to the owners that must be recovered through profit for the business to continue. Could be forgone interest from money the owners have invested, rental paymnts that could have been earned if the building were leased.
  4. Normal profit
    Profit necessary to recover implicit costs and keep a business in operation; considered to be an economic cost of production. It is the profit necessary to keep a business going.
  5. Excess Profit
    Profit beyond the normal profit; not considered a cost of production.
  6. Marginal Revenue
    The change in total revenue when one more (or additional) unit of an item is demanded.
  7. Externality
    The effect of an action on a person or thing that was not one of the parties involved in the action.
  8. Rational Ignorance
    Choosing to remain uniformed because the marginal cost of obtaining the information is higher than the marginal benefit from knowing it.
  9. Creative Destruction
    New, technologically advanced machinery and production methods cause the disappearance of old machiner and methods. As technology grows and new ideas advance, some processes and equipment bcome obsolute.
  10. Long Run
    A production time frame in which all factors of production are variable in amount. There are no fixed factors to limit production.
  11. Oligopoly
    • Markets dominated by a few large sellers; products are differentiated or identical; entry into the market is difficult.
    • Characteristics: the market is dominated by a few large sellers, but there may also be small fringe sellers in the market as well.
    • The products of the sellers may be differentiated or identical
    • Entry of firms into the market is quite difficult because of barriers to entry such as teh financing needed to enter the marekt and be large enough to compete.
  12. Monopolistic Competition
    • Market structure characterized by a large number of sellers with differentiated outputs and fairly easy entry and exit. A monopolistically competitive market has a large number of sellers -- not as many as in pure competition, but a large number nevertheless;
    • Differentiated products -- buyers cn distinguish among the products of different sellers and
    • Fairly
Card Set
Econ 165 test 3
econ 165 test 3 vocab