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Analysis that involves comparing marginal benefits and marginal costs.
The idea that because of scarcity, producing more of one good or service means producing less of another good or service.
The highest-valued alternative that must be given up to engage in an activity.
An economy in which the government decides how economic resources will be allocated.
An economy in which the decisions of households and firms interacting in markets allocate economic resources.
An economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.
A situation in which a good or service is produced at the lowest possible cost.
A state of the economy in which production is in accordance with consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it.
A situation that occurs in markets when both the buyer and seller of a product are made better off by the transaction.
The fair distribution of economic benefits.
Something measurable that can have different values, such as the incomes of doctors.
Analysis concerned with what is.
Analysis concerned with what ought to be.
The study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices.
The study of the economy as a whole, including topics such as inflation, unemployment, and economic growth.
The bearer of residual risk. They innovate at their own peril. They may lose capital, reputation, or their life in the process of innovating.
A way in which outputs are changed into inputs. Also, processes used to produce goods and services.
An entity that makes decisions together. Legal entity that is organized to to economic activity.
The inputs of capital, labor, etc to make something
A curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology.
The ability of the economy to increase the production of goods and services.
A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade.
A market for goods—such as computers—or services—such as medical treatment.
A market for the factors of production, such as labor, capital, natural resources, and entrepreneurial ability.
The inputs used to make goods and services. For example, labor, capital, natural resources, or entrepreneurs
A model that illustrates how participants in markets are linked.
A market with few government restrictions on how a good or service can be produced or sold or on how a factor of production can be employed.
The rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it.
A table that shows the relationship between the price of a product and the quantity of the product demanded.
The amount of a good or service that a consumer is willing and able to purchase at a given price.
A curve that shows the relationship between the price of a product and the quantity of the product demanded.
The demand by all the consumers of a given good or service.
The rule that, holding everything else constant, when the price of a product falls, the quantity demanded of the product will increase, and when the price of a product rises, the quantity demanded of the product will decrease.
This effect helps explains the law of demand. The substitution effect is the change in the quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods that are substitutes.
This effect helps explain the law of demand. The Income Effect is the change in the quantity demanded of a good that results from the effect of a change in the good’s price on consumers’ purchasing power.
The requirement that when analyzing the relationship between two variables—such as price and quantity demanded—other variables must be held constant.
A good for which the demand increases as income rises and decreases as income falls.
A good for which the demand increases as income falls and decreases as income rises.
Goods and services that can be used for the same purpose.
Goods and services that are used together.
The characteristics of a population with respect to age, race, and gender.
The amount of a good or service that a firm is willing and able to supply at a given price.
A table that shows the relationship between the price of a product and the quantity of the product supplied.
A curve that shows the relationship between the price of a product and the quantity of the product supplied.
The rule that, holding everything else constant, increases in price cause increases in the quantity supplied, and decreases in price cause decreases in the quantity supplied.
A positive or negative change in the ability of a firm to produce a given level of output with a given quantity of inputs.
A situation in which quantity demanded equals quantity supplied.
A market equilibrium with many buyers and many sellers.
A situation in which the quantity supplied is greater than the quantity demanded.
A situation in which the quantity demanded is greater than the quantity supplied.
A market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.
The reduction in economic surplus resulting from a market not being in competitive equilibrium.
Government taxes and subsidies intended to bring about an efficient level of output in the presence of externalities.
An approach that involves the government imposing quantitative limits on the amount of pollution firms are allowed to emit or requiring firms to install specific pollution control devices.
A contract under which a buyer agrees to make payments, or premiums, in exchange for the provider’s agreeing to pay some or all of the buyer’s medical bills.
A system under which doctors and hospitals receive a separate payment for each service that they provide.
A system, such as the one in Canada, in which the government provides health insurance to all of the country’s residents.
A health care system under which the government owns most of the hospitals and employs most of the doctors.
A situation in which one party to an economic transaction has less information than the other party. It is when the information is not the same on both sides and someone tries to make a transaction.
The situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction. This is where the term "market for lemons" comes in.
A market in which buyers don’t know what they’re getting and sellers who are dumping their product. It leads to a market failure.
The actions people take after they have entered into a transaction that make the other party to the transaction worse off.
A problem caused by agents pursing their own interests rather than the interests of the principals who hired them.
Health care legislation passed by Congress and Obama. Provisions are everyone must have health care (individual mandate), small businesses will get help in providing their employees with healthcare & large businesses must provide health insurance (employer mandate), health insurance companies must provide care to prior rejected clients, Medicare & Medicaid was expanded, there will be new taxes for health care, and state's must provide an Affordable Insurance Exchange (State health exchanges).
Changes in the market for health care that would make it more like the markets for other goods and services.
Sole proprietorship: A firm owned by a single individual and not organized as a corporation.
Partnership: A firm owned jointly by two or more persons and not organized as a corporation.
Corporation: A legal form of business that provides owners with protection from losing more than their investment should the business fail.
Anything of value owned by a person or a firm.
The legal provision that shields owners of a corporation from losing more than they have invested in the firm.
The way in which a corporation is structured and the effect that structure has on the corporation’s behavior.
A situation in a corporation in which the top management, rather than the shareholders, control day-to-day operations.
A flow of funds from savers to borrowers through financial intermediaries such as banks. Intermediaries raise funds from savers to lend to firms (and other borrowers).
A flow of funds from savers to firms through financial markets, such as the New York Stock Exchange.
A financial security that represents a promise to repay a fixed amount
An interest payment on a bond.
The cost of borrowing funds, usually expressed as a percentage of the amount borrowed.
A financial security that represents partial ownership of a firm. This is an investment in which the investor plans on sharing in the success or failure of a firm.
Payments by a corporation to its shareholders.
Anything owed by a person or a firm.
A financial statement that sums up a firm’s revenues, costs, and profit over a period of time.
A financial statement that sums up a firm’s financial position on a particular day, usually the end of a quarter or year (12/31 usually)
A cost that involves spending money.
A nonmonetary opportunity cost.
A firm’s revenues minus all of its implicit and explicit costs.
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