Chapter 11
Resource demand that arises from the demand for the product the resource produces
What is derived demand
Time sold as labor
What is market work
Consumers value present consumption more than future consumption
What is positive rate of time preference
The expansion of a firm into stages of production earlier or later than those in which it specializes, such as a steel maker that also mines iron ore
What is vertical integration
The ability of a firm to raise its price without losing all its customers to rival firms
What is market power
Portion of a resource's earnings that exceeds its opportunity cost
What is economic rent
Time spent getting an education or on do-it-yourself production for personal consumption
What is nonmarket work
Interest per year as a percentage of the amount saved or borrowed
What is interest rate
A firm buys inputs from outside suppliers
What is outsourcing
Government regulation aimed at improving health and safety
What is social regulation
The change in total revenue when an additional unit of a resource is employed, other things constant
What is marginal revenue product
Time spent on nonwork activities
What is leisure
The expected annual earnings divided by capital's purchase price
What is expected rate of return on capital
Area of specialty; the product or phase of production a firm supplies with greatest efficiency
What is core competency
Government regulation of natural monopoly; where becuase of economies of scale, average production cost is lowest when a single firm supplies the market
What is economic regulation
The change in total cost when an additional unit of a resource is hired, other things constant
What is marginal resource cost
A higher wage encourages more work because other activities now have a higher opportunity cost
What is substitution effect of a wage increase
An intangible asset created by human knowledge and ideas
What is intellectual property
The notion that there is a limit to the information that a firm's manager can comprehend and act on
What is bound rationality
Government regulation aimed a preventing monopoly and fostering competition in markets where competition is desirable
What is antitrust policy
Resources that substitute in production; an increase in the price of one resource increases the demand for the other
What is resource substitutes
A higher wage raises a worker's income, increasing the demand for all normal goods, including leisure, so the quantity of labor supplied to market work decreases
What is income effect of a wage increase
The negative relationship between the market interest rate and the quantity of loanable funds demanded, other things constrant
What is demand for loanable funds
Average costs decline as a firm makes a range of different products rather than specializing in just one product
What is economies of scope
Government owned or government regulated monopolies
What is public utilities