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Economics ch 7-12
| Question | Answer |
|---|---|
| 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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