Unit 2 - Custom Scholars
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Unit 2

question
single proprietorship
answer
one owner manager who is personally responsible for all aspects of the business
question
Ordinary Proprietorship
answer
a firm that has two or more joint owners, each of whom is personally responsible for the firm's actions and debts
question
limited partnership
answer
general partners take part in the running of the business and are liable for all the firms debts. Limited partners take no part in the running of the business and their liability is limited to the amount they actually invest in the enterprise
question
Corporation
answer
owners are not personally responsible for anything that is done in the name of the firm though its directors may be. The shares of a private corporation are not traded on any stock exchange whereas the shares of a public corporation are
question
State owned enterprise
answer
is owned by the government but is usually under the direction direction of a more or less independent state approved board
question
non profit organisation
answer
profits generated remain within the company and not dispersed to any individuals
question
production function
answer
a technological relationship between inputs and outputs
question
production function notation
answer
Q = f(K,L)
question
Accounting Profits
answer
revenues - explicit costs
question
explicit costs
answer
The actual payments a firm makes to its factors of production and other suppliers.
question
implicit costs
answer
Indirect, non-purchased, or opportunity costs of resources provided by the entrepreneur
question
economic profits
answer
revenues - (explicit costs + implicit costs)
or Accounting profits - implicit costs
question
Short run
answer
Fixed factors cannot be changed
question
fixed factors
answer
Factors of production that cannot be altered in the short run (elements of capital, land, rent, skilled labour,etc)
question
Variable Factors
answer
Factors of production that can be altered in the short run quickly or easily (raw materials, etc.)
question
long run
answer
period in which all input can be varied but the technology of production cannot
question
very long long
answer
technological possibilities of production can change
question
diminishing marginal
answer
...
question
real capital
answer
Is the physical facilities used to produce goods and services. long term productive assets (plant and equipment)
question
spreading overhead
answer
The process of dividing total fixed costs by more units of output. Average fixed cost declines as quantity rises.
question
a firms capacity
answer
the output level corresponding to minimum average total cost
question
marginal revenue
answer
the additional income from selling one more unit of a good; sometimes equal to price
question
diseconomies of scale
answer
increases in cost per unit when output increases
question
economies of scale
answer
factors that cause a producer's average cost per unit to fall as output rises
question
Ceteris Paribus
answer
all other things held constant
question
Productivity
answer
The value of a particular product compared to the amount of labor needed to make it.
question
cost minimization
answer
a firm's goal of producing a specific quantity of output at minimum cost
question
profit maximization
answer
A method of setting prices that occurs when marginal revenue equals marginal cost.
question
increasing returns to scale (economies of scale)
answer
an increase in a firm's scale of production leads to lower costs per unit produced
question
decreasing returns to scale (diseconomies of scale)
answer
an increase in a firms scale of production leads to higher costs per unit produced
question
Principle of Substitution
answer
methods of production will change if prices of inputs change with relatively more of the cheaper input, and less of the more expensive output
question
long-run average cost curve
answer
the lowest possible cost of producing each level of output if all inputs are the variable boundary between what is attainable and unattainable without technology innovation
question
minimum efficient scale
answer
The lowest rate of output at which a firm takes full advantage of economies of scale
question
productivity growth
answer
output per unit of some input such as labour
question
market structure
answer
The nature and degree of competition among firms operating in the same industry.
question
market power
answer
the ability to alter the market price of a good or service
question
perfectly competitive market
answer
firms produce a homogeneous product and are price takers with no market power
question
competitive behavior by firms
answer
the degree to which individual firms activley vie with one another for business
question
constant returns to scale
answer
the property whereby long-run average total cost stays the same as the quantity of output changes
question
total revenue
answer
total receipts from the sale of a product, price times quantity
question
average revenue
answer
total revenue divided by the quantity sold
question
marginal revenue
answer
the change in total revenue from an additional unit sold
question
shut-down price
answer
the price that is equal to the minimum of a firms average varible costs
question
short run equilibrium
answer
for a competitive industry the price and output at which industry demand equals short run industry supply
1 of 44
question
single proprietorship
answer
one owner manager who is personally responsible for all aspects of the business
question
Ordinary Proprietorship
answer
a firm that has two or more joint owners, each of whom is personally responsible for the firm's actions and debts
question
limited partnership
answer
general partners take part in the running of the business and are liable for all the firms debts. Limited partners take no part in the running of the business and their liability is limited to the amount they actually invest in the enterprise
question
Corporation
answer
owners are not personally responsible for anything that is done in the name of the firm though its directors may be. The shares of a private corporation are not traded on any stock exchange whereas the shares of a public corporation are
question
State owned enterprise
answer
is owned by the government but is usually under the direction direction of a more or less independent state approved board
question
non profit organisation
answer
profits generated remain within the company and not dispersed to any individuals
question
production function
answer
a technological relationship between inputs and outputs
question
production function notation
answer
Q = f(K,L)
question
Accounting Profits
answer
revenues - explicit costs
question
explicit costs
answer
The actual payments a firm makes to its factors of production and other suppliers.
question
implicit costs
answer
Indirect, non-purchased, or opportunity costs of resources provided by the entrepreneur
question
economic profits
answer
revenues - (explicit costs + implicit costs)
or Accounting profits - implicit costs
question
Short run
answer
Fixed factors cannot be changed
question
fixed factors
answer
Factors of production that cannot be altered in the short run (elements of capital, land, rent, skilled labour,etc)
question
Variable Factors
answer
Factors of production that can be altered in the short run quickly or easily (raw materials, etc.)
question
long run
answer
period in which all input can be varied but the technology of production cannot
question
very long long
answer
technological possibilities of production can change
question
diminishing marginal
answer
...
question
real capital
answer
Is the physical facilities used to produce goods and services. long term productive assets (plant and equipment)
question
spreading overhead
answer
The process of dividing total fixed costs by more units of output. Average fixed cost declines as quantity rises.
question
a firms capacity
answer
the output level corresponding to minimum average total cost
question
marginal revenue
answer
the additional income from selling one more unit of a good; sometimes equal to price
question
diseconomies of scale
answer
increases in cost per unit when output increases
question
economies of scale
answer
factors that cause a producer's average cost per unit to fall as output rises
question
Ceteris Paribus
answer
all other things held constant
question
Productivity
answer
The value of a particular product compared to the amount of labor needed to make it.
question
cost minimization
answer
a firm's goal of producing a specific quantity of output at minimum cost
question
profit maximization
answer
A method of setting prices that occurs when marginal revenue equals marginal cost.
question
increasing returns to scale (economies of scale)
answer
an increase in a firm's scale of production leads to lower costs per unit produced
question
decreasing returns to scale (diseconomies of scale)
answer
an increase in a firms scale of production leads to higher costs per unit produced
question
Principle of Substitution
answer
methods of production will change if prices of inputs change with relatively more of the cheaper input, and less of the more expensive output
question
long-run average cost curve
answer
the lowest possible cost of producing each level of output if all inputs are the variable boundary between what is attainable and unattainable without technology innovation
question
minimum efficient scale
answer
The lowest rate of output at which a firm takes full advantage of economies of scale
question
productivity growth
answer
output per unit of some input such as labour
question
market structure
answer
The nature and degree of competition among firms operating in the same industry.
question
market power
answer
the ability to alter the market price of a good or service
question
perfectly competitive market
answer
firms produce a homogeneous product and are price takers with no market power
question
competitive behavior by firms
answer
the degree to which individual firms activley vie with one another for business
question
constant returns to scale
answer
the property whereby long-run average total cost stays the same as the quantity of output changes
question
total revenue
answer
total receipts from the sale of a product, price times quantity
question
average revenue
answer
total revenue divided by the quantity sold
question
marginal revenue
answer
the change in total revenue from an additional unit sold
question
shut-down price
answer
the price that is equal to the minimum of a firms average varible costs
question
short run equilibrium
answer
for a competitive industry the price and output at which industry demand equals short run industry supply

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