AP Macroeconomics: Unit 3 Flashcards

9173672471	Utility-maximizing rule	Equating the ratio of the marginal utility of a good to its price for all goods.	0
9173672472	Marginal utility	Additional satisfaction or usefulness a consumer gets from having one more unit of a product	1
9173672473	Economic profit	Total revenue minus total cost, including both explicit and implicit costs	2
9173676308	Explicit costs	The actual payments a firm makes to its factors of production and other suppliers.	3
9173676309	Economies of scale	Factors that cause a producer's average cost per unit to fall as output rises	4
9173681194	Minimum efficient scale	the lowest production point at which long-run total average costs (LRATC) are minimized	5
9173681195	Law of diminishing returns	increasing one factor of production will increase output up to a point, then begin to decrease	6
9173686755	Imitation problem	situation in which firm's rivals may imitate newly invented product or process, so that profit gained by firm that initiated R&D process is greatly reduced	7
9173686756	Substitution effect	That portion of a change in quantity demanded due to a change in the relative price of the product	8
9173689513	Implicit costs	the opportunity cost equal to what a firm must give up in order to use a factor of production for which it already owns and thus does not pay rent	9
9173689514	Diseconomies of scale	the property whereby long-run average total cost rises as the quantity of output increases	10
9173693622	Natural monopoly	industry in which one company can most efficiently supply all needed goods or services	11
9173693623	Law of diminishing marginal utility	As the quantity of a good consumed increases the extra satisfaction gained decreases	12
9173698188	Fast-second strategy	Firms follow similar firms to become the second firm to produce a good; helps save on research and development	13
9173698189	Economic cost	The value of all resources used to produce a good or service; opportunity cost	14
9173701754	Normal profit	The accounting profit earned when all resources earn their opportunity cost	15
9173701755	Constant returns to scale	Features of a firm's technology that keep average total cost constant as output increases.	16
9173707747	Expected-rate-of-return curve	for each dollar spent, there is a minimum amount the company expects in return	17