Chapter 8 Key Terms Flashcards
optimal decision
a decision which, among all the decision that are actually possible, best achieves the decision maker’s goals. For example, if profit is the sole objective of some firm, the price that makes the firm’s profit as large as possible is optimal for that company.
total profit
net earnings of a firm during some period of time. It is equal to the total amount of money the firm gets from sales of its products (the firm’s total revenue) minus the total amount that it spends to make and market those products (total cost)
economic profit
net earnings, in the accountant’s sense, minus the opportunity costs of capital and of any other inputs supplied by the firm’s owners
total revenue (TR)
the total amount of money a supplier firm receives from the purchasers of its products, without any deduction of costs
average revenue (AR)
total revenue (TR) divided by quantity
marginal revenue (MR)
the addition to total revenue resulting from the addition of one unit to total output. Geometrically, marginal revenue is the slope of the total revenue curve at the pertinent output quantity.
marginal profit
the addition to total profit resulting from one more unit of output
