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19 terms

Micro Chapter 9; Making decisions

STUDY
PLAY
explicit costs
costs that involves actually laying out of money; money i spent to go to school
implicit cost
does not require an outlay of money: money i would have earned if not in school
accounting profit
business is the business's revenue minus the explicit cost and depreciation
economic profit
business is the business's revenue minus the opportunity cost of its resources
capital
business is the value of an asset
implicit cost of capitol
opportunity cost of the capitol used by a business
marginal cost
producing a good or service is the additional cost incurred by producing one more unit of that good or service
constant marginal cost
when each additional unit costs that same to produce as the previous one.
marginal cost curve
shows how the cost of producing one more unit depends on the quantity that has already been produced
increasing marginal cost
when each additional unit costs more to produce that the previous one
marginal benefit
good or service is the additional benefit derived from producing one or more good or service
decreasing marginal benefit
activity when each additional unit of the activity produces less benefit than the previous one
marginal benefit curve
shows how the benefit from producing one more unit depends on quantity that has already been produced
optimal quantity
quantity that generates the maximum possible total net gain
principle of marginal analysis
optimal quantity is the quantity at which marginal benefit i equal to marginal costs
sunk cost
cost has already been incurred and in nonrecoverable
interest rate
price calculates as a % of the amount borrowed, charged by the ender
present value formula
amount of money you must kend out to make sure you have the same as when you started
net present value
present value of current ad future benefits minus the present value of current and future costs