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.
  3. Implicit Costs
    The opportunity costs to business owners from using their resources in the business rather than in an alternative opportunity; must be recovered to keep the business in operation; normal profit.
  4. Normal Profit
    Profit necessary to recover implicit costs and keep a business in operation; considered to be an economic cost of production.
  5. Excess Profit (Economic Profit)
    Profit beyond 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 teh parties involved in the action.
  8. Rational ignorance
    Choosing to remain uninformed because teh marginal cost of obtaining the information is higher than the marginal benefit from knowing it.
  9. Creative Destruction
    As technology grows and new ideas are advanced, some processes and equipment become obsolute.
  10. Long Run
    A production time frame in which all factors of production are variable in amount.
  11. Monopolistic Competition
    Market structure characterized by a large number of sellers with differentiated outputs and fairly easy entry and exit. A monopolistic competition market has 1) a large number of sellers -- not as many as in pure competition, but a large number nonetheless; 2) differentiated products -- buyers can distinguish among the products of different sellers; and 3) fairly easy entry into and exit from the market.
  12. Oligopoly
    Markets dominated by a few large sellers; products are differentiated or identical; entry into the market is difficult. In an oligopoly: 1) the market is dominated by a few large sellers, but there may also be small fringe sellers in the market as well; 2) the products of teh sellers may be differentiated or identical; and entry of firms into the market is quite difficult because of barriers to entry such as the financing needed to enter the market and be large enough to compete.
  13. Monopoly
    A market with one seller that maintains its position because entry by new sellers is impossible. In a monopoly market there is: 1) only one seller -- the momopolist; 2) no need to consider the issue of product differentiation since thre is just one seller and 3) no possibility of entry by new sellers.
  14. Antitrust Laws
    Laws prohibiting certain practices that reduce competition.
  15. Sherman Act
    Original and most broadly worded federal antitrust statute; condemns combinations and conspiracies in restraint of trade, and momopolization and attempts to monopolize.
  16. Price Fixing
    Joint action by sellers to influence their product prices; considered to be highly competitive.
  17. Territorial Division
    Joint action by sellers to divide sales territories among themselves; considered to be highly anticompetitive.
  18. Horizontal Merger
    A merger between two sellers competing in the same market.
  19. Vertical Merger
    A merger between a firm and a supplier or distributor.
  20. Derived Demand
    The demand for a factor of production depends on the demand for the good or service the factor produces. It is derived from, or depends on, the demand for the good or service the factor produces.
  21. Durable Good
    A good that has a useful lifetime of more than 1 year.
  22. Household
    A person living alone or a group of related or unrelated persons who occupy a house, apartment or other housing unit.
  23. Law of Diminishing Marginal Utility
    As additional units of an item are consumed, beyond some point each successive unit of the item consumed will add less to total utility than was added by the unit consumed just before it.
  24. Marginal Utility (Marginal Benefit)
    The change in total satisfaction from consuming an additional unit of a good, service or activity.
  25. Fixed Costs
    The costs of fixed factors are called fixed costs.
  26. Variable Costs
    The costs for a business' variable factors is called variabl costs and include hourly wages, payments for raw materials and machinery.
  27. Nonprice competition
    Firms focus on a feature other than price to attract buyers to their products.
  28. Purely competitive market
    A market with a large number of independent sellers producing identical products, and with easy entry into and exit from the market.
  29. Michael Dodge
    A few days before his 28th birthday, he jumped from a third story window to comit suicide after four prior unsuccessful attempts. This was his fifth attempt in ten years. Mother died when he was 17. Dad was very depressed over it and moved around to find work in the oil fields. Sister is Elizabeth and she got him to move to East Coast. Tried a clinic for help but quit taking prescription. Did not bathe often and argued with sister over hygene. He left and roamed the streets and shelters. Too shy to panhandle.
Card Set
econ 165 test 3
vocab for test 3 econ