Chapter 5 Study Guide: Economics

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supply
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schedule of quantities offered for sale at all possible prices in a market
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supply schedule
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tabular listing showing the quantities produced or offered for sale at each and every possible price in the market
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supply curve
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graphical representation of the quantities produced at each and every price in the market
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law of supply
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rule stating that more will be demanded at lower prices and less at higher prices; inverse relationship between price and quantity demanded
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quantity supplied
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amount offered for sale at a given price; point of the supply curve
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change in quantity supplied
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change in the amount offered for sale in response to price change; movement along the supply curve
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change in supply
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different amounts offered for sale at each and every price possible; shift of the supply curve
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subsidy
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government payment to encourage or protect a certain economic activity
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supply elasticity
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responsiveness of quantity supplied to a change in price
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theory of production
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deals with the relationship between the factors of production and the output of goods and services
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short run
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production period so short that only variable inputs can be changed
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long run
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production period long enough to change the amount of variable and fixed inputs used in production
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law of variable proportions
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short run output will change as one input is varied while others are held constant
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production function
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graphical portrayal showing how a change in the amount of a single variable input affects total output
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raw materials
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unprocessed natural resources used in production
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total product
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total production/ output a firm has
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marginal product
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extra output due to the addition of one of one more unit of input
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stages of production
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increasing, decreasing, and negative returns
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diminishing returns
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stages of production where output increases at a decreasing rate as more units of variable inputs are added
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fixed cost
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cost of production that does not change even through prices rise
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overhead
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broad category of fixed costs that includes interest, rent, taxes, and executive salaries
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depreciation
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gradual wear on capital goods during production
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variable cost
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production cost that varies as output changes; labor, energy, and raw materials
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total cost
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variable plus fixed cost; all costs associated with production
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marginal cost
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extra cost of producing one additional unit
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total revenue
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total receipts; price of goods sold times quantity sold
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marginal revenue
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extra revenue from the sale of one additional unit of output
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marginal analysis
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decision making that compares the extra cost of doing something to the extra benefits gained
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break even point
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production needed to recover its costs; production level where total cost equals total revenue
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profit-maximizing quantity of output
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level of production where marginal cost is equal to marginal revenue
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How much to offer for sale
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What is the basic decision for a supplier?
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Increase in the number of sellers
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What would cause the supply curve to shift right?
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Marginal Cost
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What is the extra cost incurred by 1 additional unit of a product called?
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Supply
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What is the schedule of quantities that would be offered for sale at all possible prices that could prevail in the market?
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Elastic
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If the price of a product increases modestly, and if producers respond with a substantial increase in output, then the supply is what?
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Make less
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What will producers do if the price of a product falls?
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The act of producers offering something for sale and how much.
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Supply is based on?
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The demand curve
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The supply curve is a mirror of what image?
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Freedom to adjust production
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What does the producer have in a market economy?
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Stage 2
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Firms want to maximize profits produced in what stage of production?
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Output of goods and services
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The theory of production deals w/ the relationship b/w the factors of production and what?
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The gradual WEAR and tear on capital goods
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Depreciation
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When marginal cost and marginal revenue are equal
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Where is the profit maximizing quantity of output found?
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Motivation is preformed
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When does productivity rise?
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Increasing returns
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What does stage 1 of the production function show?
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Taxes go down
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When does quantity supplied increase?
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Lowers the cost of production and encourages producers to stay in the market
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What is the effect of government subsidies?
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Fixed and Variable Cost
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What does total cost include?

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