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AP Microeconomics Terms 2014

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Absolute Advantage

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Terms in this set (154)

Absolute Advantage

The ability to produce more of a good than all other producers.

Absolute(or money) prices

The price of a good measured in units of currency

accounting profit

The difference between total revenue and total explicit cosy

The assumption that all other variables are held constant so that we can predict how a change in one variable affects a second. Also known as the "ceteris paribus" assumption

allocative effiency

Production of the combination of goods and services

average fixed cost(AFC)

Total fixed cost divided by output

Average product(APL) of labor

Total product divided by the labor employed

Average tax rate

The proportion of total income paid to taxes

Average total cost(ATC)

Total cost divided by output

Average variable cost(AVC)

Total variable cost divided by output

Capitalist market system(capitalism)

An economic system based upon the fundamentals of private property, freedom, self-interest, and prices

Firms that agree to maximize their joint profits rather than compete

Circular flow of economic activity(or circular of goods and services)

A model that shows how households and firms circulate resources, goods, and incomes through the economy. This basic model is expanded to include the government and the foreign sector.

collusive oligopoly

Models where firms agree to work together to mutually improve their situation

comparative advantage

The ability to produce a good at lower opportunity cost than all other producers