| Term | Definition |
|---|
| business firm | an organization that uses resources to produce goods and services that are sold to consumers, other firms, or the government |
| shirking | behavior of a worker who is putting forth less than the agreed-to effort |
| sole proprietorship | business that is owned by one individual who makes all business decisions, receives all the profits or incurs all the losses of the firm, and is legally responsible for the debts of the firm |
| partnership | business owned by two or more coowners, called partners, who share profits and are legally responsible for debts |
| corporation | legal entity that can conduct business in its own name in the same way that an individual does |
| stockholder | person who owns shares of stock in a corporation |
| asset | anything of value to which the firm has legal claim |
| limited liability | condition in which an owner of a business firm can lose only the amount he or she has invested (in the firm) |
| board of directors | an important decision-making body in a corporation; decides corporate policies and goals, among other things |
| franchise | contract by which a firm (usually a corporation) lets a person or group use its name and sell its goods in exchange for certain payments and requirements |
| franchiser | entity that offers a franchise |
| franchisee | person or group that buys a franchise |
| fixed cost | cost or expense that is the same no matter how many units of a good are produced |
| variable cost | cost or expense that changes with the number of units of a good produced |
| total cost | sum of fixed costs plus variable costs |
| average total cost | total cost divided by the quantity of output |
| marginal cost | cost of producing an additional unit of a good; the change in total cost that results from producing an additional unit of output |
| marginal revenue | revenue from selling an additional unit of a good; change in the total revenue that results from selling an additional unit of output |
| law of diminishing marginal returns | law that states that if additional units of one resource are added to another resource, in fixed supply, eventually the additional output will decrease |
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