Principles of Microeconomics: Theory of Production

These flashcards cover essential economic concepts related to the theory of production and firm behavior in microeconomics.

Entrepreneur

An individual who takes on the risk of starting a new business.

Capital equipment

Assets such as machinery or equipment that are used in the production process.

Financial capital

Monetary resources used to acquire physical capital or fund operations.

Collateral

An asset that a borrower offers to a lender to secure a loan.

Contract

A legally enforceable agreement between parties.

Limited liability company (LLC)

A business structure that limits the personal liability of its owners.

Initial public offering (IPO)

The first sale of shares by a company to the public.

Profit function

 total revenue minus total costs.

Accounting profit

The difference between total revenue and explicit costs.

Economic profit

The difference between total revenue and both explicit and implicit costs. (opportunity cost)

Market capitalism

An economic system where private individuals own and control property and businesses.

Socialism

An economic system where the government owns and controls the means of production.

Sole proprietorship

A business owned and operated by a single individual.

Partnership

A business structure where two or more individuals own and operate a business together.

Value added

The enhancement added to goods or services by a company.

Intermediate goods

Products used to produce final goods.

Human capital

Skills, knowledge, and experience possessed by an individual.

Intellectual property (IP)

Creations of the mind for which exclusive rights are recognized.

Trade secrets

Confidential business information that provides a competitive edge.

Non-disclosure agreement (NDA)

A legally binding contract that prevents disclosure of confidential information.

Sharp economic efficiency

The optimal allocation of resources to produce goods and services based on consumer desires.

Economies of scale

Cost advantages that businesses obtain due to scale of operation.

Diseconomies of scale

Increased per-unit costs as a company scales production.