Chapter 7: Producers in the Short Run

Bond

A debt instrument carrying a specified amount, a schedule of interest payments, and (usually) a date for redemption of its face value

Corporation

A firm that has a legal existence separate from that of the owners

Limited Partnership

A firm that has two classes of owners: general partners, who take part in managing the firm and are personally liable for the firm's actions and debts, ad limited partners, who take no part in the management of the firm and risk only the money that they have invested

Ordinary Partnership

A firm that has two or more joint owners, each of whom is personally responsible for the firm's actions and debts

State-Owned Enterprise

A firm that is owned by the government. In Canada, these are called Crown, corporation

Production Function

A functional relation showing the maximum output that can be produced by any given combination of inputs

Long Run

A period of time in which all inputs may be varied, but the existing technology of production cannot be changed

Short Run

A period of time in which the quantity of some inputs cannot be increased beyond the fixed amount that is available

Very Long Run

A period of time that is long enough for the technological possibilities available to a firm to change

Total Fixed Cost

All costs of production that do not vary with the level of output

Intermediate Products

All outputs that are used as inputs by other producers in a further stage of production

Variable Factor

An input whose quantity can be changed over the time period under consideration

Fixed Factor

An input whose quantity cannot be changed in the short run

Multinational Enterprises

MNEs Firms that have operations in more than one country

Dividends

Profits paid out to shareholders of a corporation

Marginal Product

The change in total output that results from using one more unit of a variable factor

Economic Profits

The different between the revenues received from the sale of output and the opportunity cost of the inputs used to make the output. Negative economic profits are called economic losses

Law of Diminishing Returns

The hypothesis that if increasing quantities of a variable factor are applied to a given quantity of fixed factors, the marginal product of the variable factor will eventually decrease

Marginal Cost

The increase in total cost resulting from increasing output by one unit

Total Cost

The total cost of producing any given level of output; it can be divided into total fixed cost and total variable cost

Total Product

Total amount produced by a firm during some time period

Average Total Cost

Total cost producing a given output divided b the number of units of output; it can also be calculated a the sum of average fixed costs and average variable costs. Also called unit cost or average cost

Total Variable Cost

Total costs of production that vary directly with the level of output

Average Fixed Cost

Total fixed cost divided by the number of units of output

Average Product

Total product divided by the number of units of the variable factor used in its production

Average Variable Cost

Total variable cost divided by the number if units of output

Single Proprietorship

a firm that has one owner who is personally responsible for the firm's actions and debts