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variable cost

a cost that changes with the number of units of a good produced

total cost

fixed cost plus variable cost

average total cost

total cost divided by quantity of output

marginal cost

cost of producing an additional unit of a good

marginal revenue

revenue from selling an additional unit of a good

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

three types of firms

sole proprietorships, partnerships, corporations


one firm, great deal control over price


few firms, stand. or diff. product, quite difficult barriers of entry

nader view

biz has ethical/social responsibilities

real wage =

money wage divided by CPI (consumer price index)

friedman view

one social responsibility = use resources to make best profit w/o deception/fraud



Samuel Gompers

active in AFL (american federation of labor)

price searcher

seller that can sell some of its output at various prices

price taker

seller that can sell all its output at the equilibrium price but can sell none at any other price

cartel agreement

an agreement that specifies how the firms that entered into the agreement will act in a coordinated way to reduce the competition among them

sherman antitrust act (1890)

prevents mergers

federal trade commission act (1914)

prohibits aggressive price-cutting acts

robinson-patman act (1936)

prevents suppliers from offering discounts to large businesses to prevent closing of small businesses

wheeler-lea act (1938)

empowered the federal trade commission (FTC) to deal with fraudulent acts by businesses

knights of labor (1869)

union group calling for higher wages and an 8-hour working day

american federation of labor (1886)

samuel gompers! lobbying for better pay and improved working conditions

the norris-laguardia and wagner acts

1932 and 1935; claimed workers should be free from interference, restraint, and coercion of employers; made it illegal for employers to interfere with employees' rights to organize a union

taft-hartley act

gave states the right to pass right-to-work laws

landrum-griffin act (1959)

policed internal affairs of labor unions

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