Economic Costs Quiz Flashcards
cost that requires an outlay of money
explicit cost
cost that is measured by the value, in dollar terms, of benefits that are forgone
implicit cost
the sum of explicit and implicit cost
opportunity cost
revenue-explicit cost
accounting profit
revenue-opportunity cost of resources used (economic cost)
economic profit
total value of assets owned by an individual or firm
capital
cash, stock, bonds
financial assets
buildings, equipment, tools, inventory
physical assets
opportunity cost of the use of one’s own capital, income earned if the capital had be used in its next-best alternative
implicit cost of capital
when making an either-or choice between two activities, choose
the one with the positive economic profit
additional cost incurred by producing one more unit of a good or service
marginal cost
when each additional unit costs more to produce than the previous one
increasing marginal cost
when each additional unit costs the same to produce as the previous one
constant marginal cost
quantity that generates the highest possible total profit
optimal quantity
when making a profit-maximizing how much decision, continue the activity as long as
the marginal benefits/revenue are greater than the marginal costs
