No Free Lunch: Economics for a Fallen World: Third Edition, Revised

Appendix A Definition Index 472 A Absolute advantage: An individual (or firm, or country) is said to have an absolute advantage if he can produce any given good or service with fewer resource inputs than his potential trading partner. (Chapter 2—Increased Production from the Division of Labor) Accounting profits: the difference between total revenues and total costs (accounting costs). (Chapter 7—Profit: The Driving Force for Entrepreneurs/Accounting Profit vs. Economic Profit) Acting man: a theoretical construact to describe human action, focusing on the way humans evaluate situations and continually strive to “substitute a more satisfactory state of affairs for a less satisfactory.” (Chapter 1—Assumptions) Aggregate demand: the sum of spending in the economy, or, the sum of income in an economy. (Chapter 18—Aggregate Demand and GDP) Aggregate supply: the sum of all the production activities in the economy. (Chapter 18—Aggregate Supply) Alert arbitrageur: someone who is especially attentive to opportunities to profit from price differentials between markets. (Chapter 9—The Entrepreneur as Alert Arbitrageur) Allocative efficiency: when the marginal buyer receives a benefit that matches the cost to produce the good. (Chapter 8—Perfect Competition) Arbitrage: the act of buying in cheap markets in order to sell in expensive markets. (Chapter 4—Every Demander Potentially a Supplier?) Arbitrageur: one who buys in a cheap (inexpensive) market in order to sell in a dear (expensive) market. The arbitrageur is able to profit by exploiting price differences between markets. (Chapter 9—Entrepreneurship: The Essence of the Market Process/ Enter the Entrepreneur!) Asset inflation: a general rise in prices of financial assets including stocks, bonds, and commodities as a result of expansionary monetary policy. (Chapter 12—Federal Reserve Policy) Autarky: when all production is internal to the unit (individual or state) with no trade; the unit is self-sufficient. (Chapter 2—Gains from Trade) Average total (unit) costs: the average cost of one unit of output. It is calculated by dividing total costs by the quantity produced: ATC = TC/Q. (Chapter 7—Short Run Costs)