Business Costs
Costs that do not change with the level of output in the short run.
What are Fixed Costs (FC)?
The market structure where a single firm has no close substitutes for its product.
What is a Monopoly?
The condition for allocative efficiency where the price (P) equals the marginal cost (MC).
What is P = MC (Price equals Marginal Cost)?
This phrase from the GDP definition means production must occur within the country’s physical territory.
What is "Within a country's borders"?
A sustained decrease in the general level of prices.
What is Deflation?
The cost of flour, sugar, and eggs for a bakery would fall into this cost category.
What are Variable Costs (VC)?
In pure competition, firms are unable to influence the market price, making them this.
What is a Price Taker?
This government action is used to correct a negative externality like pollution from a factory.
What is a tax (or regulation)?
The component of the Expenditure Approach that includes a family buying a brand-new house.
What is Investment (I)?
Individuals who are able to work but have stopped looking for a job because they believe no jobs are available.
What are Discouraged Workers?
The cost formula: Fixed Costs + Variable Costs.
What is Total Cost (TC)?
This key feature of an oligopoly means that one firm’s actions will affect the fortunes of another firm.
What is Mutual Interdependence?
A good that is both non-rivalrous (one person’s use doesn’t stop another) and non-excludable.
What is a Public Good?
Payments like Social Security or unemployment benefits are excluded from GDP because they are classified as this.
What is a Transfer Payment?
The practice of moving production or jobs to a foreign country.
What is Outsourcing?
Payroll taxes and health insurance premiums paid by the employer are this type of labor cost.
What are Indirect Labor Costs (or Labor Overhead)?
The method that allows a monopolistic competitor to charge a slightly higher price than its rivals.
What is Product Differentiation (or branding/non-price competition)?
When a positive externality occurs, the market will lead to this result in terms of production.
What is underproduction (or under-allocation)?
This is calculated using a standard basket of goods and services relative to the cost of the same basket in a fixed base year.
What is the Consumer Price Index (CPI)?
The Fisher Effect describes the tendency for nominal interest rates to adjust to changes in this.
What is Inflation (or the inflation rate)?
The measure of a worker's efficiency calculated by dividing output by labor hours.
What is Labor Productivity?
The specific type of monopoly that exists because the costs are lowest when only one firm provides the output (due to economies of scale).
What is a Natural Monopoly?
The type of market failure that occurs when one party to an exchange has more or better information than the other.
What is Asymmetric Information?
This measure of national output is corrected for inflation to accurately reflect the volume of goods produced.
What is Real GDP?
To get a more stable measure of inflation, the price changes for these two volatile items are typically excluded from the calculation.
What are Food and Energy?