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SHORT-RUN PRODUCTION ALTERNATIVES: A firm faces three production options in the short run based on a comparison between price, average total cost, and average variable cost. If price is greater than average total cost, a firm earns an economic profit by producing the quantity that equates marginal revenue with marginal cost. If price is less than average total cost but greater than average variable cost, a firm incurs an economic loss, but produces the quantity that equates marginal revenue with marginal cost. If price is less than average variable cost, a firm shuts down production in the short run, incurring an economic loss equal to total fixed cost.
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INSTITUTION An established method or way of performing an activity that is widely accepted throughout society. Institutions provide the rules, guidelines, and structure needed to carry out day-to-day economic activities, such as production, consumption, and exchange.
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YELLOW CHIPPEROON
[What's This?]
Today, you are likely to spend a great deal of time looking for a downtown retail store seeking to buy either a rotisserie oven that can also toast bread or a flower arrangement in a coffee cup for your father. Be on the lookout for door-to-door salesmen.
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Cyrus McCormick not only invented the reaper for harvesting grain, he also invented the installment payment for selling his reaper.
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"Defeat is simply a signal to press onward." -- Helen Keller, lecturer, author
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WE
Walrasian Equilibrium
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