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20 Cards in this Set

  • Front
  • Back
Explicit cost
Requires an expenditure-->actually laying out money.
Implicit cost
measured from the value in dollar terms of the benefits that are foregone. Not an outlay of money.
Accounting profit
Revenue-expenses (explicit costs)- depreciation
Economic profit
revenue-total cost (explicit and implicit costs)-deprectiation. usually less than the accounting profit.
What does economists take into consideration that Accountants do not?
what you give up
the value of a business' assets, equipment, buildings, tools, inventory, and financial assets.
Where does a firm try to set production?
at the intersection of the MC and MB curves
Implicit cost of capital
the opportunity cost of the capital used by a business- the income the owner could have realized from that capital if it could have been used in its next best alternative way.
Marginal cost
the additional cost of producing one more unit of good
Marginal benefit
the additional benefit from producing 1 more unit of good.
increading marginal cost
when each additional unit of the activity costs more than the previous unit.
Marginal cost cuve
shows how the cost of undertaking one more unit of the activity depends on the quantity of that activity that has already been done.
Borrowing/ lending money- interest rate
Decreasing marginal benefit
when each additional unit of the activity costs less than the previous unit.
Marginal benefit curve
shows how the benefit from taking one more unit of activity depends on the quantity of activity that has already been done.
Optimal quantity
the quantity that generates the maximum possible total net gain
principal of marginal analysis
the optimal quantity of an activity is the the quantity when marginal benefit-marginal cost
Sunk cost
cost that has already been incurred and is non recoverable. it should be ignored in decisions about future actions.
present value
FV/(1+r)^n. to see what the present value is if you have a future value.
Present value of current and future benefits-PV of current and future costs.