question

When one producer can produce more of all goods, for given levels of inputs, than other producers.

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Absolute advantage

question

The price of a good in money terms; the monetary valuation of a good without reference to the general price level.

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Absolute price

question

Explaining only one event or being useful for only one occasion.

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Ad hoc

question

Government policy giving preference to selected minority groups, particularly in hiring.

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Affirmative action

question

The misconception of concluding that event A must be true because event B is true, from a theory that states that event A implied event B.

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Affirming the consequent

question

The resulting labor union from the merger of the old American Federation of Labor and the Congress of Industrial Organization.

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AFL-CIO

question

The relationship between an individual's age and their earnings or income over their lifetime.

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Age-earnings profile

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The problem on party, the principal, faces, when he or she delegates tasks to another party, the agent. How does the principal create incentives for the agent to do what the principal wants, rather than what the agent wants?

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Agency problem (principal-agent problem)

question

The total amount of goods and services demanded by consumers, businesses, and the government in an economy.

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Aggregate demand (macroeconomics)

question

The sum of individual demand curves into a market demand curve.

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Aggregate demand (microeconomics)

question

When the distribution of resources among competing ends leads to the exhaustion of mutual gains.

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Allocative efficiency

question

When the distribution of resources among competing ends leaves mutual benefits unclaimed.

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Allocative inefficiency

question

The highest valued option which is foregone when an action or decision is undertaken.

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Alternative/opportunity cost

question

A union of skilled laborers founded in 1881, now merged with the Congress of Industrial Organization (CIO).

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American Federation of Labor (AFL)

question

A contract to pay or receive a series of uniform payments occurring at regular intervals for a stated number of years.

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Annuity

question

Laws or statutes which discourage monopoly and collusive practices and encouraged increased competition.

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Antitrust legislation/statutes

question

The percentage change in quantity divided by the percentage change in price calculated by using the midpoint of two points along a demand or supply curve of as the point of reference.

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Arc elasticity

question

The universal postulates of a theory.

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Assertions

question

An item owned by an individual, firm, or the government that generates income.

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Asset

question

Support from the government in the form and goods and services rather than monetary outlays.

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Assistance in kind

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Simplifications made to make a theory more usable or easier to control.

answer

Assumptions

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When a party to a transaction has more a=or at least different information than the other party or any of the other parties involves. Usually, the case where the seller has more information than the buyer.

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Asymmetry of information (Asymmetric information)

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Where the decision one makes concerns incremental units of a good.

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At the margin

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A form of government where all citizens vote on all issues, as in ancient Athens.

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Athenian democracy

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Total costs divided by the total quantity of output produces.

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Average costs (AC)

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A "u" shaped curve (because of scale economics at low levels of output) which graphically represents the average level of costs at each level of output produced.

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Average cost curve (Average total cost curve)

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Total fixed costs divided by total quantity output produces.

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Average fixed costs (AFC)

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A declining or negatively sloped (asymptotic to he origin) curve which graphically represents the level of average fixed costs at each level of output produces. The curve is always a rectangular hyperbola.

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Average fixed cost curve

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The total product of particular input divided by the quantity of the inputs used.

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Average product (of an input) (AP)

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Total consumption divided by the relevant duration of time.

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Average rate of consumption

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Total revenue divided by the total quantity of output produces. This always equals the unit price of the good.

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Average revenue (AR)

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Total costs divided by the total quantity of output produces. Equivalently, the sum of average fixed costs plus average variable costs.

answer

Average total costs (ATC)

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A "u" shaped curve (because of scale economies at low levels of output) which graphically represents the level of average total costs at each level of output produced.

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Average total cost curve (Average cost curve)

question

Total variable costs divided by the total quantity of output produced.

answer

Average variable costs

question

A "u" shaped curve which graphically represents the level of average variable costs for each level of output produces.

answer

Average variable costs curve

question

An undesirable entity, something individuals would pay to have less of.

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Bad or economic bad

question

When an individual, firm, or organization legally declares that they are unable to pay their debts.

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Bankrupt

question

Restrictions on the abilities of other firms to go into business in a monopolistic industry, where existing firms are earning positive profits. Examples range from patents, ti actions of governments or government agencies such as licensing arrangements, or huge start-up costs, where the underlying technology may result in a single firm being the least cost method of producing the good.

answer

Barrier to entry

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The direct exchange of goods and services for other goods and services without the use of money.

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Barter

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Establishes prices of delivered goods including an amount for transportation from a given production locale, whether or not the producer is located there.

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Basing point pricing

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A model in which two firms independently attempt to maximize their profits by simultaneously choosing prices.

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Bertrand duopoly

question

The unexpected result, that in equilibrium, marginal cost pricing and zero profitability characterize a Bertrand duopoly.

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Bertrand paradox

question

Exchange between two parties.

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Bilateral trade

question

Exchanges of either illegal goods or those good in violation of government regulations such as tax laws and price controls.

answer

Black market (underground economy)

question

A tie-in-sale where movies are sold as a bundle without allowing the possibility of theaters to select only those they wish to show.

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Block booking

question

Legal obligations of corporations and governments to pay periodic fixed sums for a specified number of years, plus the faces vale of the bond, the principal, at maturity.

answer

Bonds

question

Regulations which force car companies to produce cars so that the average miles per gallon for the fleet of cares produces by each company meets some government standard.

answer

Corporate Average Fleet Equivalency (CAFE standards)

question

Any resource or produced good that produces income in the future.

answer

Capital

question

The increase in the market value of an asset between the time at which the asset is bought and subsequently sold.

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Capital gain

question

The economic system wherein the means of production, capital and land, are privately owned and operated in the pursuit of individual gain.

answer

Capitalism

question

The present value of an expected future income stream.

answer

Capitalized value

question

Markets in which borrowing and lending take place. Households and firms and the government lend or supply their savings for claims to future profits or for interest to other individuals, forms or governments who borrow to increase present consumption or to finance the production of capital goods.

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Capital market

question

A group of producers who agree to set price and output collectively so as to increase joint profits bu achieving a monopoly position in the market.

answer

Cartel

question

Money held by an individual.

answer

Cash balances

question

Economies in which resource allocations and production decisions are made by a central planner, the central government.

answer

Centrally planned economies

question

All else being equal; holding all other variable fixed so as to investigate the effect of a change in one variable on one other variable.

answer

Ceteris paribus

question

A shift in the entire demand curve for a good. This occurs when anything other than the price of the good changes, such as income, the price of a substitute or complementary good, information about the good. The amount an individual is willing to purchase of a certain good change at each level of price.

answer

Change in demand

question

The change in the amount of a good a consumer is willing to purchase caused by a change in the price of the good. This is a movement along the demand curve.

answer

Change in quantity demanded

question

The change in the amount of a good a producer is willing to offer for sale prompted by a change in the price of the good. This is a movement along the supply curve.

answer

Change in quantity supplied

question

A shift in the entire supply curve. This occurs when something other than the price of the good changes, such as new technology, weather, or natural disasters.

answer

Change in supply

question

Antitrust law that outlawed certain monopoly practices such as price discrimination, tying contracts and unlimited mergers, in addition to clarifying the "rule of reason".

answer

Clayton Act of 1914

question

Where prior union membership in a condition of employment.

answer

Closed shop

question

The proposition that in the absence of transaction costs, that is, with clearly delineated property rights, the assignment of liability to damages created by one individual will not prevent the exhaustion of mutual benefits, though the incomes of the parties involved will be affected.

answer

Coase Theorem

question

The process by which union representatives and managers of a firm negotiate labor contracts, that is, conditions and terms of employment.

answer

Collective bargaining

question

The coordination in secret of producers to raise price and reduce output, that is, set a monopolistic price and quantity, in order to maximize joint profits; generally illegal.

answer

Collusion

question

Consistent with the theory. Not to be confused with proven.

answer

Confirmed

question

Economies wherein the government determines by fiat the allocation of resources and all production decisions, the quantity to be produced, the price charged, and the means of distribution.

answer

Command economies

question

Any item which is bought and sold.

answer

Commodity

question

Any item that is used as a medium of exchange that also has an alternative non-monetary use. Example: gold

answer

Commodity money

question

The unwritten law of a country based on custom, tradition, ad precedents of court rulings.

answer

Common law

question

A resource for which there is no owner. No individual has the right to exclude any others from its use.

answer

Common property / public domain

question

The policy which requires jobs with similar characteristics to pay similar wages.

answer

Comparable worth

question

When a producer can produce a good with a lower opportunity cost of production than another.

answer

Comparative advantage

question

The efforts of parties to secure rights to scarce goods.

answer

Competition

question

The price and quantity determined by the intersection of the supply and demand curves for goods, where the quantity demanded equals quantity supplied.

answer

Competitive equilibrium

question

A firm which takes price as given and produces where its marginal cost equals that market price.

answer

Competitive firm

question

Goods, which are used jointly in production or consumed jointly, for example: a hammer and nails. Two goods are __ if a rise in the price of one good leads to a decrease in demand for the other, holding everything else constant.

answer

Complementary goods (or inputs) / complements

question

Money paid or received for the use of money which based on the accumulated principal, that is, the original principal and the accumulated interest, not just on the original amount.

answer

Compound interest

question

An industry with HH, a Herfindahl-Hirschman index, greater the 1800.

answer

Concentrated industry

question

The possibility that a changing majority might always prefer a different outcome, no matter what choice is made.

answer

Condercet's paradox / voting paradox

question

Crowding on a resource so that the actions of one person affects the costs or productivity of others using that resource.

answer

Congestion

question

Founded in 1935, the first union organizing semi-skilled laborers in mass production industries.

answer

Congress of Industrial Organization (CIO)

question

The property that when all factor inputs change in the same proportion, output changes in that exact same proportion.

answer

Constant returns to scale

question

All things which impinge on behavior and are in principle capable of being measured, in contrast to preferences. In the theory of the consumer, prominent constraints are income, prices, time, technology, education, and laws.

answer

Constraints

question

The most widely used measure of the average price level in the economy. It is calculated using the cost of a market basket of goods consumed by households, reported every month by the Bureau of Labor Statistics.

answer

Consumer Price Index (CPI)

question

The difference between what a consumer would be willing to pay for the units purchased, total value, and what the consumer actually pays, total expenditure. Graphically, the triangular area under the demand curve and above the market price.

answer

Consumer's surplus

question

Spending by households on final goods.

answer

Consumption

question

A market with no significant barriers to entry by new firms.

answer

Contestable market

question

An organization for the production of goods owned collectively by all members who share in the rents.

answer

Cooperative

question

The exclusive right to the publication or production of a form of literary of artistic work granted by law for the rest of one's life plus 28 years (in the U.S.)

answer

Copyright

question

A firm owned by stockholders whose liability is limited to the value of the assets of the firm. The private assets of the stockholders are beyond the reach of creditors.

answer

Coporation

question

When a change in one variable is regularly associated with a change in another variable.

answer

Correlation

question

In economics, synonymous with alternative, or opportunity cost. The highest valued option which is foregone when an action or decision is undertaken.

answer

Cost / Economic cost

question

A model in which two firms independently attempt to maximize their profits by simultaneously choosing quantities.

answer

Cournot duopoly

question

A labor union where only individuals involved in a certain same craft of trade belong.

answer

Craft union

question

A market where funds are loaned to borrowers.

answer

Credit market

question

An individual to whom another or others are indebted.

answer

Creditior

question

A measure of the responsiveness in quantity demanded of one good to the change in price of another good. The percent change in the quantity demanded of one good divided by the percentage change in price of another good. It is positive for substitute goods and negative for complementary goods.

answer

Cross elasticity of demand

question

Observations on any number of economic units at a given point in time, in contrast with time series data.

answer

Cross section data

question

Paper money and coins.

answer

Currency

question

The price consumers actually faced or the number of dollars actually paid in the designated year.

answer

Current price / current dollar terms

question

The lost mutual benefits from trade when output is reduced below its efficient level, that is, where price equals marginal cost.

answer

Dead weight loss

question

One who owes something to another or others.

answer

Debtor

question

An industry where average total costs decrease as a firm's output increases, so that the lowest average costs occur when the industry consists of only one firm.

answer

Decreasing average cost industry

question

A production process where proportional increases in all factor inputs leads to an increase in output in a smaller proportion.

answer

Decreasing returns to scale

question

A fall in the general level of prices.

answer

Deflation

question

A curve which graphically represents the quantity of a particular good a consumer is willing to purchase at each level of price. The fundamental law of demand stated that this curve in downward sloping.

answer

Demand curve

question

Funds deposited in a band which is transferable by check, that is, withdrawn on demand.

answer

Demand deposit

question

The curve depicting the amount of labor firms desire at various wage rates. It is a derived demand because labor inputs are not desired for their own sake, but rather for the useful goods the produce. It is a downward sloping curve because of the law of diminishing marginal product.

answer

Demand curve for labor

question

The curve depicting the negative relationship between the amount of real money balances desired by individuals at any given nominal rate of interest, the price of holding money.

answer

Demand curve for money

question

A table displaying the quantity demanded of a good for selected price. A discrete form of the demand curve.

answer

Demand schedule

question

The amount by which the value of capital is reduced by wear and tear or used up over a given period of time.

answer

Depreciation

question

A severe or prolonged economic recession, marked by substantial unemployment and reduced aggregate output.

answer

Depression

question

The revoking of government regulations to allow the market to function more freely.

answer

Deregulation

question

The demand which results not from the desire for the good (input) itself but from the goods or services of the good (input) produces. Example: the demand for labor

answer

Derived demand

question

The puzzling observation that water, a necessity for life, is relatively very cheap, whereas diamonds, which are pleasant frivolities are relatively expensive.

answer

Diamond-water paradox

question

An industry where firms sell non-homogeneous products, and face demand curves that are downward sloping to some degree.

answer

Differentiated industry

question

Goods which are very similar but not viewed as perfect substitutes by consumers, such as different brands of the same good.

answer

Differentiated products

question

An imprecise term; in economics, meaning either diminishing returns at the extensive margin or diminishing returns at the intensive margin.

answer

Diminishing returns

question

The phenomenon that when industries expand, eventually the ability to replicate the productive process decreases, as firms must use inputs that are less and less efficient.

answer

Diminishing returns at the extensive margin

question

When more of identical units of a productive input are added to a fixed amount of other factors of production, the amount by which the input increases output becomes smaller and smaller.

answer

Diminishing returns at the intensive margin

question

Those workers who have dropped out of the labor force because there have been discourages, that is, unable to find employment.

answer

Discouraged workers

question

In the labor market, the use by firms of factors unrelated to marginal productivity in employment. More generally, the use of variable unrelated to merit in decision affect people.

answer

Discrimination

question

The loss of mutual benefits, especially due to lack of clear property rights.

answer

Dissipation of rents

question

Taxes which cause price to deviate from marginal costs, creating deadweight losses.

answer

Distortionary taxes

question

A share of a firm's profits which are paid to shareholders.

answer

Dividends

question

Breaking up a given task into smaller and more specialized tasks.

answer

Division of labor

question

The condition of successful barter; individual A has what individual B wants and individual B has what A wants.

answer

Double coincidence of wants

question

The problem caused by imperfect information, where both the buyer and the seller expand resources to evaluate some good.

answer

Duplication of measurement

question

Consumer goods which provide a service over a relatively long period of time.

answer

Durable good

question

The property that the marginal value of consumption in any period, in terms of foregone future consumption, is independent of the date of that choice.

answer

Dynamic consistency

question

An allocation of resources is dynamically efficient if it maximizes the present value of net benefits that can be feasibly generated over time.

answer

Dynamic efficiency

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