Unit 1 (PPC)
Four factors of production
what is land labor capital
a good that can be purchased instead of another
substitute
monetary payment made to an outside business to obtain a resource
explicit costs
Firm sets its own prices
what is a price maker
person who purchases goods
what is a consumer
points lying inside and outside of ppc
what are inefficient and unobtainable
A good that is generally purchased with another
compliment
time and monetary income a firm sacrifices
implicit costs
firm must take/ use prices of the market
what is a price taker
tastes/ preferences, related goods, income, buyers, expectations
what are Shifters of demand
state of production that represents consumer interests
what is allocative efficiency
extra satisfaction gained from purchasing a good/service
marginal utility
total cost divided by output
ATC
factors prevent or make it difficult for new firms to enter the industry
what are barriers to entry
resources, other goods, taxes, technology, expectations, number of firms
what are shifters of supply
the loss of profit from choosing to produce one good over another
opportunity cost
production of a good in the most cost efficient way
what is productive efficiency
MR equals MC
what is profit maximizing point
a firm can produce socially optimal quantity at lowest cost due to economies of scale
what is a natural monopoly
how much a change in price affects a change in quantity demanded or supplied
what is elasticity
adam smith
creator of capitalism and laissez faire
a minimum price fixed by the government
price floor
cooperation between firms to set prices i order to be competitive
what is a cartel
selling the same product to different buyers at different prices
what is a price discrimination
quantity demanded is higher or lower than quantity supplied