Unit 3 Economics Vocabulary

Unit 3 - Irondale Economics Vocab

Firms

an organization that uses resources to produce a product or service, which it then sells.

Total Revenue

the total amount of money a company receives by selling goods or services

Fixed Costs

a cost that does not change no matter how much of a good or service is produced (ex.rent, lease payments, machinery repairs)

Variable Cost

a cost that rises or falls depending on the quantity produced (ex. Raw materials, wages for hourly workers, electricity and heating bills)

Total Cost

the sum of fixed costs and variable costs (FC + VC \= TC)

Marginal Cost

the addition cost of producing one more unit

Average Cost

the total cost divided by the quantity produced

Profit

the amount of money a business receives in excess of its expenses (Total Revenue - Total Cost = Profit)

Commodities

a product, such as petroleum or milk, that is considered the same no matter who produces or sells it

Monopoly

a single seller controls the market

Price discrimination

the division of consumers into groups based on how much they will pay for a good

Monopolistic competition

a market structure in which many companies sell products that are similar but not identical (ex. jeans, t-shirts, bagel stores, gas stations)

Oligopoly

a market structure in which a few large firms dominate a market (ex. air travel, automobiles, dishwashers)

Antitrust law

laws that encourage competition in the marketplace to keep firms from controlling the price and supply of important goods

Mergers

when two or more companies join to form a single firm

Sole proprietorship

a business owned and managed by a single individual

Liability

the legal obligation to pay debts

Partnership

a business organization owned by two or more persons who agree on a specific division of responsibilities and profits

Limited liability partnership

a type of partnership in which all partners are limited partners

Business franchise

a semi-independent business that pays fees to a parent company in return for the exclusive right to sell a certain product or service in a given area

Corporation

a legal entity owned by individual stockholders, each of whom has limited liability for the firm’s debts

Dividends

the portion of corporate profits paid out to stockholders

Cooperatives

a business organization owned and operated by a group of individuals for their shared benefit

Nonprofits

an institution that functions much like a business but does not operate for the purpose of making a profit

Labor supply

people willing to work for wages

Equilibrium wage

the wage rate, or price of labor services, that is set when the supply of workers meets the demand for workers in the labor market

Productivity of labor

the quantity of output produced by a unit of labor

Labor union

an organization of workers that tries to improve working conditions, wages, and benefits for its members

Collective bargaining

the process in which working people, through their unions, negotiate contracts with their employers to determine their terms of employment

Shareholder/stockholder

person, company, or institution that owns at least one share of a company’s stock. Together, shareholders own the company.