Managers, Profits, and Market Flashcards
Study of the behavior of individual economic agents
Microeconomics
That the cost of something is what you gave up to get it
Opportunity cost
Owned by others and hired, rented, or leased
Market-supplied resources
Owned and used by the firm
Owner-supplied resources
Sum of the opportunity cost of both market-supplied resources and owner-supplied resources
Total Economic Cost
Monetary payments to owners of market-supplied resources can be seen in ledgers, journals, among others
Explicit Cost
Nonmonetary opportunity costs of using owner-supplied resources
Implicit Cost
Types of implicit costs
- ) Opportunity cost of cash provided by the owner
- ) Opportunity cost of using the land or capital owned by the firm
- ) Opportunity cost of the owner’s time spent in managing and working for the firm
The difference between the revenue received from the sale of an output and the cost of inputs used
Economic Profit
Economic profit
Total revenues - Total economic cost
Total revenues - explicit cost - implicit cost
It shows the amount of money a firm has left over after deducting the explicit cost of running the business
Accounting profit
Accounting Profit
Total revenues or sales - Explicit cost
Does not subtract the implicit cost from total revenues
Accounting profit
It covers all costs of all resources used by the firm, to maximize economic profit
Firm owners
Price of which it can be sold
Value of the Firm
