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average total cost (ATC)
total cost divided by the quantity produced in a given time period
average fixed cost (AFC)



total fixed cost divided by the quantity produced in a given time period
average variable cost (AVC)
total variable cost divided by the quantity produced in a given time period
capital
final goods produced for use in the production of other goods, e.g., equipment structures
capital-intensive
production processes that use a high ratio of capital to labor inputs
ceterus paribus
the assumption of nothing else changing
complementary goods
goods frequently consumed in combination; when the price of good x rises, the demand for good y falls, ceterus paribus
constant returns to scale
increases in plant size do not affect minimum average cost; minimum per-unit costs are identical for small plants and large plants
demand
the willingness and ability to buy specific quantities of a good at alternative prices in a given time period, ceterus parabus
demand curve
a curve describing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period, ceterus paribus
demand schedule
a table showing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period, ceterus paribus
economic cost
the value of all resources used to produce a good or service; opportuntity cost
economic growth
an increase in output (real GDP); an expansion of production possibilities
economics
the study of how best to allocate scarce resources among competing uses
economies of scale
reductions in minimum average costs that come about through increases in the size (scale) of plant and equipment
efficiency
maximum output of a good from the resources used in production
entrepreneurship
the assembling of resources to produce new or improved products and technologies
equilibrium price
the price at which the quantity of a good demanded in a given time period equals the quantity supplied
explicit costs
a payment made for the use of a resource
externalities
costs (or benefits) of a market activity borne by a third party; the difference between the social and private costs (benefits) of a market activity
factor market
any place where factors of production(e.g., land, labor, capital) are bought and sold
factors of production
resource inputs used to produce goods and services, e.g., land, labor, capital, entrepreneurship
fixed costs
costs of production that don't change when the rate of output is altered, e.g., the cost of basic plant and equipment
gov't failure
gov't intervention that fails fo improv economic outcomes
gross domestic product (GDP)
the total market value of all final goods and services produced w/in a nation's borders in a given time period
human capital
the knowledge and skills possessed by the workforce
income quintile
one-fifth of the pop., rank-ordered by income (e.g. top fifth)
laissez faire
the doctrine of "leave it alone" of nonintervention by gov't in the market mechanism
implicit cost
the value of resources used, even when no direct payment is made
law of demand
the quantity of a good demanded in a given time period increases as its price falls, ceterus paribus
law of diminishing returns
the marginal physical product of a variable input declines as more of it is employed with a given quantity of other (fixed) inputs
law of supply
the quantity of a good supplied in a given time period increases as its price increases, ceterus paribus
long run
a period of time long enough for all inputs to be varied (no fixed costs)
macroeconomics
the study of aggregate economic behavior, of the economy as a whole
marginal cost (MC)
the increase in tota; cost associated with a one-unit increase in production
marginal physical product (MPP)
the change in total output associated with one additional unit of input
market demand
the total quantities of a good or service people are willing and able to buy at alternative prices in a given time period; the sum of individual demands
market failure
an imperfection in the market mechanism that prevents optimal outcomes
market mechanism
the use of market prices and sales to signal desired outputs (or resource allocations)
market shortage
the amount by which the quantity demanded exceeds the quantity supplied at a given price; excess demand
market supply
the total quantities of a good that sellers are willing and able to sell at alternative prices in a given time period, ceterus paribus
microeconomics
the study of individual behavior in the economy, of the components of the larger economy
mixed economy
an economy that uses both market signals and gov't directives to allocate goods and resources
monopoly
a firm that produces the entire market supply of a particular good or service
opportunity cost
the most desired goods or services that are forgone in order to obtain something else
per capita GDP
the dollar value of GDP divided by total pop.; average GDP
price ceiling
upper limit imposed on the price of a good
price floor
lower limit set for the price of a good
product market
any place where finished goods and services (products) are bought and sold
production function
a technological relationship expressing the maximum quantity of a good attainable from different combinations of factor inputs
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