Microeconomics Chapter 9 Vocabulary

does not require an outlay of money; it is measured by the value in dollar terms of hte benefits that are forgone
EXAMPLE: time (business), opportunity cost

a cost that involves actually laying out money
EXAMPLE: paying for books in college, paying for tuition, supplies, food

the business's revenue minus the explicit costs and depreciation (expenses) - different from profit because of opportunity cost
EXAMPLE: Revenue: $100,00
Explicit cost:-60,000
Depreciation: -5,000
Accounting Profit: $35,000

the business's revenue minus the opportunity cost of its resources. It is often less than the accounting profit.
EXAMPLE: Accounting profit: $35,000
(implicit costs/ opportunity cost)
Income could've earned on capital used best way: -3,000
Income could have earned somewhere else: -34,000
Economic Profit: -2,000

the study of marginal decisions - comparing the benefit of doing a little bit more of some activity with the cost of doing a little bit more of that activity
EXAMPLE: how many spicy jalapenos should you put on your nachos - how many can you have until the cost(heat) is too much

a cost that has already been incurred and non-recoverable, should be ignored in decisions about future actions.
EXAMPLE: a vet who left law school to pursue his dream career. The cost for a year of law school was lost - a sunk cost

the value of a business's assets
EXAMPLE: tools, buildings, equipment

the additional cost incurred by producing one more unit of that good or service
EXAMPLE: marginal cost curve (nike symbol-normal)

when each addition unit costs the same as the previous one
EXAMPLE:(straight horizontal line because all costs are the same)

each unit of a good costs more to produce than the unit before
EXAMPLE: people in an assembly line are not fast when they make the first product because the product is unfamiliar at first, as they make a second and third product, they gain speed as they understand the product and what they have to do. If they get so fast that they start making 56 products but make mistakes when they push themselves, then the 56th product costs more than the one before it that didn't have mistakes

the additional benefit earned from producing one more unit of a good or service
EXAMPLE: As someone buys an order of chicken wings, the amount that they are willing to pay depends on how large a serving already is

when each additional unit of an activity produces less benefit than the previous unit
EXAMPLE: as people buy chicken wings, they are less willing to pay for one more wing because of the larger current serving size

a graphical representation of showing how the benefit from producing one more unit depends on the quantity that has already been produced
EXAMPLE: graph a in photo

the quantity that generates the maximum possible total net gain
EXAMPLE: if someone is serving wings and does not know how many should be in a serving they have to look at their net gain (marginal benefit - marginal cost). If six wings has a marg. benefit of $0.70 and a marg. cost of $0.80 the net gain would be -$0.10. If I served five wings though, my marg. benefit would be $0.90 and mrg. cost would be $0.80. The five wings is the largest portion I can serve for which marginal benefit is at least as great as marginal cost

the amount of money needed at the present time to produce, at the prevailing interest rate a given amount of money at a specified future time
EXAMPLE:$1 realized one year from now is equal to $1/(1+r): the amount of money you lend out today in order to have $1 in one year, it is the value to you today of $1 realized one year from now

the present value of current and future benefits minus the present value of current and future costs
EXAMPLE: if you have three hypothetical projects that each pay you money, but at different times, then you have to use present value formulas to determine which project would be best (the one with the highest net present value).

NOTES::

total opportunity cost = total explicit cost+total implicit cost

the opportunity cost of the capital used by a business - the income the owner could have realized from that capital if it had been used in its next best alternative

the cost before someone produces something (at 0)- referring to marginal cost

marginal benefit - marginal cost