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12 Cards in this Set
- Front
- Back
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Voluntary transactions |
create wealth bymoving assets from lower- to higher-valueduses |
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Examples of destroyment of wealth |
Anything that impedes the movement ofassets to higher-valued uses, like taxes, subsidies, or price controls |
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Defintion of efficency and inefficency in this context |
Efficiency means that each asset isemployed in its highest-valued use. Eachinefficiency implies a money-makingopportunity |
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What is the art of business? |
The art of business consists of finding anasset in lower-valued use and devising waysto profitably move it to higher-valued one. |
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What is a way to describe a company |
A company can be thought of as a series oftransactions. A well-designed organizationrewards employees who identify and consummate profitable transactions or whostop unprofitable ones |
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Define opportunity cost |
the opportunity cost of an alternative is the profit you give to pursue it |
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What are relevant benefits and relevant costs |
all costs and benefits that vary with the consequences of a decision |
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Fixed costs Variable costs |
fixed costs do not change with the amount of output variable costs change as output changes decions that change output change only variable costs |
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fixed-cost fallacy/sunk-cost fallacy |
means that you consider irrelavnt costs |
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hidden-cost fallacy |
ignore relevant costs |
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begin looking by the |
decision you are making, not the cost |
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Formula for accountingprofit |
Accounting Profit = Total Revenue - Explicit Cost |
