Economics: Chapter 5 Study Guide

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supply
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amount of a product offered for sale at all possible prices
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Law of Supply
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principle that more will be offered for sale at higher prices than at lower prices
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supply schedule
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A table showing how much a producer will supply at all possible prices
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supply curve
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A graph that shows the different amounts of a product supplied over a range of possible prices
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market supply curve
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A graph that shows the various amounts offered by all firms over a range of possible prices
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quantity supplied
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amount offered for sale at a given price.
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change in quantity supplied
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change in amount offered for sale when the price changes.
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change in supply
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situation where different amounts are offered for sale at all possible prices in the market. A shift in 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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A measure of how the quantity supplied responds to a change in price.
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production function
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a graph showing how a change in the amount of a single variable input changes total output
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short run
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production period so short that only the variable inputs (usually labor) can be changed
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long run
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production period long enough to change the amounts of all inputs
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total product
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total output or production by a firm
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marginal product
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extra output due to the addition of one more unit of input
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stages of production
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phases of production that consist of increasing, decreasing, and negative marginal returns
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diminishing returns
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stage where output increases at a decreasing rate as more units of variable input are added
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fixed costs
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costs that remain the same regardless of level of production or services offered
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overhead
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broad category of fixed costs that includes rent, taxes, and executive salaries
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variable costs
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production costs that change when production levels change
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total cost
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the sum of fixed costs and variable costs
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marginal cost
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extra cost of producing one additional unit of production
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e-commerce
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electronic business conducted over the internet
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break-even point
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production level where total cost equals total revenue
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total revenue
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total amount earned by a firm from the sale of its products
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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 costs of doing something to the extra benefits gained
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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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