Leson 44 - unit 9 Flashcards
What is profit?
The difference between total revenue and total cost / the money that a business makes by selling goods and services.
How does the possibility of profit serve as motivation?
- It encourages people to take risks
- Be efficient
- Have quality products
- Lower prices
- Proper maintenance
- Offer good wages
- And rewards to workers
How is revenue calculated?
The price of goods sold times the quantity sold.
Over what factor of revenue does a produces have the most control?
The quantity sold.
What is accounting profit?
Accounting profit is the profit that shows up on the books: revenue minus costs.
What is economic profit?
Economic profit is determined by subtracting opportunity cost as well as regular costs from the revenue.
What are fixed costs?
Costs that have to be paid regardless of production.
What are variable costs?
Costs that change depending on the amount of production.
What is the law of diminishing maginal returns?
It says that the productivity of an input decreases as the quantity of input increases.
What is the average marginal cost and what does it help to determine?
The change in total cost divided by change in quantity produced. It helps determine if additional production is more or less profitable.
Define a deadweight loss and give to examples.
A reduction in the efficiency that leads to a loss in profit or a loss in society. Ex: taxes and monopoly pricing.
