| A | B |
|---|
| average cost | total cost divided by output |
| average fixed cost | total fixed cost divided by output |
| average product | total output divided by input quantity |
| average variable cost | total variable cost divided by output |
| bond yield | interest rate a bond pays |
| capital | resources such as buildings, machinery, raw materials, and inventories that contribute to the production and distribution of goods and services |
| cartel | formal agreement between firms to collude |
| collusion | when firms agree to set prices and/or output |
| decreasing-cost industry | industry where expansion results in average cost decreasing |
| demand curve | curve showing the quantity demanded at each price |
| duopoly | a market where there are two sellers |
| equilibrium | situation where there is no tendency to change (i.e. equilibrium price) |
| expected profilt | long-term average profit (multiply each possible profit level by its probability of occurring) |
| explicit costs | a firm's costs for accounting purposes (like payroll or purchase of raw materials) |
| fixed cost | total cost per period of time of the fixed inputs |
| fixed input | resource used in the production process, the quantity of which cannot be changed during the given time period |
| increasing-cost industry | industry in which expansion results in higher input prices |
| inferior good | product where an increase in the consumer's income causes a decrease in demand |
| input | a resource used in the production process |
| interest rate | premium paid to a lender one year from now if he lends a dollar right now |
| intermediate good | a good used to produce other goods or services |
| labor | human work used to produce goods and services |
| law of diminishing marginal returns | as additional increments of input are added, the resulting increments of product become smaller |
| law of diminishing marginal utility | as more of a product is consumed, marginal utility of the product decreases |
| marginal cost | increase to total cost caused by producing one more increment of output |
| marginal product | amount that total output increases by due to adding one more unit of input |
| marginal rate of substitution | how many units of good A the consumer must receive after giving up a unit of B (to maintain constant satisfaction) |
| marginal revenue | increase in total revenue caused by selling one more unit of product |
| marginal utility | increase in satisfaction due to consuming one additional unit of a product |
| market | group of individuals and/or firms that interact with each other to buy or sell a good |
| market demand curve | curve showing the relationship between the price of a product and the quantity demanded |
| market supply curve | curve showing the relationship between the price of a product and the quantity supplied |
| microeconomics | area of economics concerned with the behavior of individual consumers and firms |
| monopolistic competition | market in which there are many sellers of differentiated products, with easy entry and no collusion |
| monopoly | market in which there is only one seller |
| normal good | a good whose quantity demanded increases when the consumer's income increases |
| oligopoly | market in which there are few sellers of a product |
| opportunity cost | value of what a given set of resources could have produced if used in the optimal way |
| perfect competition | market in which there are many sellers, goods sold are identical, and entry is easy |
| predatory pricing | setting price unusually low in order to eliminate competition |
| price ceiling | a government-imposed maximum price |
| price elasticity of demand | the percentage demand changes when the price changes by 1% |
| price elasticity of supply | the percentage supply changes when the price changes by 1% |
| price floor | a government-imposed minimum price |
| profit | a firm's revenue minus its costs |
| social cost | cost to society of producing a given product |
| substitutes | goods related in such a way that the quantity demanded of one is directly related to the price of the other |
| supply curve | curve showing how much of a product will be supplied at various prices |
| total cost | a firm's total fixed cost plus total variable cost |
| total fixed cost | a firm's total expenditure on fixed inputs in a given period of time |
| total revenue | a firm's total sales in a given period of time |
| total variable cost | a firm's total expenditure on variable inputs in a given period of time |
| variable cost | total cost of the variable inputs in a given period of time |
| variable input | resource used in production, the quantity of which is changeable during a given time period |
