Managerial Economics – Chapter 11

question

Welfare Economics

answer

Study of how the allocation of economic resources affects the material well-being of consumers and producers

question

Social Welfare

answer

Material well-being of society

question

Consumer Surplus

answer

Net benefit by consumers from consumption

question

Producer Surplus

answer

Net benefit by producers from production

question

Deadweight Loss Problem

answer

Decline in social welfare due to competitive market distortion

question

Welfare Loss Triangle

answer

Graphic representation of deadweight loss when linear supply and demand curves are employed

question

Market Power

answer

Ability to set prices and obtain above-normal profits for extended periods

question

Market Failure

answer

Situation when competitive market outcomes fail to efficiently allocate economic resources

question

Failure by Market Structure

answer

Situation when competitive markets malfunction because of market power

question

Externalities

answer

Uncompensated benefits or costs tied to production or consumption

question

Failure by Incentive

answer

Situation when competitive markets malfunction because of externalities

question

Economic Efficiency

answer

Least-cost production of desired goods and services

question

Economic Regulation

answer

Government control of production and/or consumption

question

Social Equity

answer

Fairness

question

Consumer Sovereignty

answer

Individual control over economic decisions

question

Limit Concentration

answer

Restrict economic and political power

question

Subsidy Policy

answer

Government support strategy

question

Tradable Emission Permits

answer

Transferrable pollution licenses

question

Deadweight Loss of Taxation

answer

Decline in social welfare due to decline in economic activity caused by taxes

question

Tax Incidence

answer

Point of tax collection

question

Tax Burden

answer

Economic hardship due to tax

question

Price Floor

answer

Minimum price

question

Price Ceiling

answer

Maximum price

question

Return on Stockholders' Equity

answer

Net income divided by the book value of total assets minus total liabilities

question

Profit Margin

answer

Net income expressed as a percentage of sales revenue

question

Total Asset Turnover

answer

Sales revenue divided by the book value of total assets

question

Leverage

answer

Ratio of total assets divided by stockholders' equity

question

Reversion to the Mean

answer

Tendency of firm profit rates to converge over time toward long-term averages

question

Disequilibrium Profits

answer

Short-term economic profits prior to long-term market adjustment

question

Disequilibrium Losses

answer

Below-normal returns suffered in the short run prior to long-term market adjustment

question

Economic Luck

answer

Temporary good fortune due to some unexpected change in industry demand or cost conditions

question

Competitive Strategy

answer

Search for a durable advantage over competitors

question

Economic Rents

answer

Profits due to uniquely productive inputs

1 of 33

question

Welfare Economics

answer

Study of how the allocation of economic resources affects the material well-being of consumers and producers

question

Social Welfare

answer

Material well-being of society

question

Consumer Surplus

answer

Net benefit by consumers from consumption

question

Producer Surplus

answer

Net benefit by producers from production

question

Deadweight Loss Problem

answer

Decline in social welfare due to competitive market distortion

question

Welfare Loss Triangle

answer

Graphic representation of deadweight loss when linear supply and demand curves are employed

question

Market Power

answer

Ability to set prices and obtain above-normal profits for extended periods

question

Market Failure

answer

Situation when competitive market outcomes fail to efficiently allocate economic resources

question

Failure by Market Structure

answer

Situation when competitive markets malfunction because of market power

question

Externalities

answer

Uncompensated benefits or costs tied to production or consumption

question

Failure by Incentive

answer

Situation when competitive markets malfunction because of externalities

question

Economic Efficiency

answer

Least-cost production of desired goods and services

question

Economic Regulation

answer

Government control of production and/or consumption

question

Social Equity

answer

Fairness

question

Consumer Sovereignty

answer

Individual control over economic decisions

question

Limit Concentration

answer

Restrict economic and political power

question

Subsidy Policy

answer

Government support strategy

question

Tradable Emission Permits

answer

Transferrable pollution licenses

question

Deadweight Loss of Taxation

answer

Decline in social welfare due to decline in economic activity caused by taxes

question

Tax Incidence

answer

Point of tax collection

question

Tax Burden

answer

Economic hardship due to tax

question

Price Floor

answer

Minimum price

question

Price Ceiling

answer

Maximum price

question

Return on Stockholders' Equity

answer

Net income divided by the book value of total assets minus total liabilities

question

Profit Margin

answer

Net income expressed as a percentage of sales revenue

question

Total Asset Turnover

answer

Sales revenue divided by the book value of total assets

question

Leverage

answer

Ratio of total assets divided by stockholders' equity

question

Reversion to the Mean

answer

Tendency of firm profit rates to converge over time toward long-term averages

question

Disequilibrium Profits

answer

Short-term economic profits prior to long-term market adjustment

question

Disequilibrium Losses

answer

Below-normal returns suffered in the short run prior to long-term market adjustment

question

Economic Luck

answer

Temporary good fortune due to some unexpected change in industry demand or cost conditions

question

Competitive Strategy

answer

Search for a durable advantage over competitors

question

Economic Rents

answer

Profits due to uniquely productive inputs

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Managerial Economics – Chapter 11

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