The profit over and above normal profit (i.e. the profit over and above the opportunity cost of the resources used in production by the firm).
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Absolute advantage
Exists when a country is able to produce a good more cheaply in absolute terms than any other country.
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Ad velorem tax
A tax that is levied as a percentage of the price of the good (e.g., 17.5% VAT)
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Allocative efficiency
Occurs when nobody can be made better off by transferring resources from one industry to another without making somebody worse off.
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Average Cost
The average cost of production per unit. It is calculated by dividing the total cost by the quantity produced. It is equal to the total variable cost + the total fixed cost.
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Average fixed cost
The average fixed cost of production per unit. It is calculated by dividing the total fixed cost by the quantity produced. It falls as quantity produced rises.
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Average product
The quantity of output per unit of input.
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Average revenue
Is calculated by dividing total revenue by the quantity produced. It is equal to the price paid for the good (so long as the price is the same for all consumers).
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Average variable cost
The average variable cost of production per unit. It is calculated by dividing the total variable cost by the quantity produced.
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Barriers to entry
Factors which make it difficult or impossible for a firm to enter a particular market and compete with existing firms.
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Barriers to exit
These can occur if there are high sunk costs that can not be recovered if the firm leaves the industry.
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Capital
One of the factors of production. It includes all buildings and machinery.
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Cartels
A group of producers that attempt to increase the price of their good by limiting output or agreeing upon a price to sell their goods at.
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Other cards in this set
Card 2
Front
Absolute advantage
Back
Exists when a country is able to produce a good more cheaply in absolute terms than any other country.
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