Economics Chapter 5 Study Guide

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Quantity Supplied
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Amount offered for sale at a given price
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Change in supply
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Different amounts offered for sale at each and every price in the market
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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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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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Law of supply
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Rule stating that more will be offered for sale at high prices than at lower prices.
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Supply Schedule
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Table 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 possible price in a market.
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Market Supply curve
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Supply curve that shows the quantities offered at various prices by all firms that sell the product in a given market.
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Changes in quantity supplied
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Change in amount offered for sale in response to a price change; movement along the supply curve.
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Theory of Production
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Theory dealing 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 amount of variable and fixed inputs used in production
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Law of Variable Proportions
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Rule stating that 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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Graphic portrayal showing how a change in the amount of a single variable inputs 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 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 – increasing, decreasing, and negative returns.
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Diminishing returns
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Stage of production where output increases at a decreasing rate as more units of variable input are added.
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Fixed cost
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Cost of production that does not change when output changes
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Overhead
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Board category of fixed costs that includes interest, rent, taxes, and executive salaries.
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Variable cost
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Production cost that varies as output changes; labor, energy, 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 of production.
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E-commerce
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Electronic business or exchange conducted over the Internet.
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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 output due to the addition of one more unit of input.
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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 if the firm is 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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