• Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
Front

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

image

PLAY BUTTON

image

PLAY BUTTON

image

Progress

1/17

Click to flip

Card Range To Study

through

17 Cards in this Set

  • Front
  • Back
transaction cost
cost of trading above and beyond the price
contestable markets
markets in which firms can rapidly enter and exit
Firm
Turns inputs into labor
Production Function
Y=F(K,L)
Objective

Equation
Maximize Profits

Profit = Revenue - Cost
Efficient Production
Maximum output for given input
Sole Propietorship and Partnership
1) personally liable for debts
2) Decisions made by owners
cooperations
1) capital divided into shares help by individual shareholders with limited liability
2) decisions often made by managers
Principal - Agent Problem
how to incentivize managers to not deviate from profit max objectives
how do corporations raise money?
1) selling shares or stocks to share holders (return of investment: collecting dividends and selling stocks at profit)

2)Issue debt (pay with interest, lower risk than shareholders, lower returns)
change firm size to:
1) increase output
2) produce own inputs (especially if cost of doing business wiht other firms is high)
3) optimal size - larger firm more difficult to monitor managers and employees
Increase size by:
1) Investing
2) Mergers and Acquisitions
Vertical Merger
firm combines with suppliers
Horizontal Merger
competing firms within same market combine
Conglomerate merger
firms in unrelated markets combine
positive merger effect
mergers that increase efficiency.
■ reduce duplicated costs.
■ reduce transaction costs.
■ create synergies (economies of
scope)
Negative Merger effect
mergers that decrease efficiency.
■ tax advantage only.
■ short run gains.
■ increase in market power - decrease in
competition.