absolute advantage - CORRRECT ANSWER when a country (or person) can produce more of a good than
another country (In this picture England has absolute
... [Show More] advantage in both goods)
accounting profit - CORRRECT ANSWER profit computed using only explicit costs (Acct Profit = Total
Revenue - Explicit Costs)
marginal external costs - CORRRECT ANSWER additional costs incurred by third parties outside the
production process when a unit of output is produced
adverse selection - CORRRECT ANSWER when the buyer of a product has more information than the
seller of the product in a transaction
allocative efficiency - CORRRECT ANSWER when society is providing the right mix of goods and services
to the population
asymmetric information - CORRRECT ANSWER a situation where the seller or the buyer has more
information than the other regarding the quality of the item being sold
average fixed cost (afc) - CORRRECT ANSWER total fixed cost divided by quantity - always decreases as
output increases (because top of the fraction stays the same while bottom of the fraction increases)
average product - CORRRECT ANSWER the output per unit of input
average product of labor - CORRRECT ANSWER the number of units of output each unit of labor
produces on average (Q/L)
average revenue - CORRRECT ANSWER total revenue divided by quantity (always equal to price!)
average total cost (atc) - CORRRECT ANSWER total cost divided by quantity; it is the firm's total cost per
unit of output
average variable costs (avc) - CORRRECT ANSWER total variable cost divided by quantity; it is the firm's
total variable cost per unit of output
barriers to entry - CORRRECT ANSWER something that blocks the entry of new firms in a monopoly or
oligopoly market
budget constraint - CORRRECT ANSWER we can't spend more than our budget
budget line - CORRRECT ANSWER graphically shows the combination of two goods a consumer can buy
with a given budget - the number on each axis shows the maximum amount a consumer can buy if they
only buy that good and none of the other good
capital - CORRRECT ANSWER a factor of production that is made to produce other things (tools,
equipment, etc.)
cartel - CORRRECT ANSWER a group of firms that overtly collude to act like a monopoly (reduce output
and drive up prices)
ceteris paribus - CORRRECT ANSWER holding everything else constant and changing only one thing to
see the effect
change in demand - CORRRECT ANSWER a shift in a demand curve (the demand curve moves either to
the right or to the left) Never caused by a change in price!
change in quantity demanded - CORRRECT ANSWER a movement along the demand curve caused by a
change in price
change in quantity supplied - CORRRECT ANSWER a movement along the supply curve caused by a
change in price
change in supply - CORRRECT ANSWER a shift in the supply curve (the supply curve moves either to the
right or the left) Never caused by a change in price!
choice at the margin - CORRRECT ANSWER a decision to do a little more or little less of something (more
of one thing means less of the other)
circular flow diagram - CORRRECT ANSWER a diagram that views the economy as consisting of
households and firms interacting in a goods and services market and a factor market
comparative advantage - CORRRECT ANSWER when a country (or person) has a lower opportunity cost
per unit of production
complements - CORRRECT ANSWER two goods for which an increase in price of one decreases the
demand for the other
concentration ratio - CORRRECT ANSWER the percentage of output accounted for by the largest firms in
an industry (helps determine whether the market is oligopoly or monopolistic competition)
constant - CORRRECT ANSWER something whose value does not change [Show Less]