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Economics ch 7-12

Define Firm buys or rents productive resources (also known as inputs) and attempts to transform them into marketable outputs.
Define business firm
In what three ways are firms organized? Sole proprietorship, partnerships, corporate form
What are corporate owners called? Stockholders
Who do the stockholders vote for? a board of directors
Who do the board of directors appoint to manage the corporation along the guidelines set by the charter of incorporation and the directors? officers of the corporation
What are one of the strengths of the corporate form? relative ease of acquiring financial assets
How does a corporation borrow funds? by issuing bonds
Define limited liability means that the stockholders of a corporation cannot be sued
What is a second advantage of a corporate organization? the ease of transferring ownership
What is a major drawback of corporate organization? double taxation
What advantage does a hybrid type of corporation share with a corporation? limited liability, not subject to double taxation
Define non-profit organizations they are separated into 2 groups: private sector and government sector
Define residual claimant an individual, or group of individuals, who shares in the profits (of any)of an enterprise.
What is the difference between non-profit and profit organizations? Non-profit organizations do not have a residual claimant.
Profits from non-profit firms are not taxed. T or F? True
Define Technical efficiency refers to the minimizing of the physical inputs to a production method according to some specific rule.
Define Market System puts the inputs into dollar terms and lets the entrepreneur choose the least-cost method of producing
Define least-cost method the economically efficient method, is chosen by the entrepreneur bc of the assumption of attempted profit maximization
Define "lack of market price information" it is one of the major problems facing the planned economics of Eastern and Central Europe as they try to make the transition to market economies.
Define production function a description of the amounts of output expected from various combination of inputs
A production function is usually described in the form of a table or graph, but it can also be shown by a mathematical formula. T or F? True.
Define Fixed Inputs the productive resources that cannot be varied in the short run, such as the size of a plant.
Define variable inputs the productive resources that can be increased or decreased in the short run.
Define Short Run When economists distinguish between fixed and variable inputs, they are referring to a time period (short run)
Define Long Run the period of time in which all inputs, including plant and equipment, can be varied
Define the Principle of Diminishing Returns as more and more units of a variable input are added to a set of fixed inputs, the resulting additions to output will eventually become smaller
Define Marginal Product the change in total output that is produced by unit change in a input
Define total product is the amount of output that a firm produces in units
Define Average Product avg prod of an input is simply the total product divided by the umber of units of the input employed
Created by: ashmash70



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