Prelims Flashcards
Simply the total cost of production divided by the number of units produced
Average cost
Process of breaking down a decision into a series of yes or no decision
Marginal Analysis
Is the cost to make and sell one additional unit of output .
Marginal Cost
Additional Revenue gained from selling one more unit
Marginal Revenue
Often have to decide between competing strategies to achieve the same end
Managers
When choosing between two alternatives, usually only one of the two choices can be selected
Opportunity Cost
Financial or non-monetary reward offered to employees for performance rather than the total number of hours worked.
Incentive Pay
Used as motivated tool to boost morale
Incentive Pay
Can be offer individually
Reward
Disadvantage of incentive pay
•Overtime, it can create a sense of entitlement, decreasing motivation and lowering performance.
•It can negatively affect employees job satisfaction
• It can create tension among co-workers
Process whereby interest is credited to an existing principal amount
Compounding
Process of converting a value received in a future time period
Discounting
Critical element in investment decision
Time
Financial calculation that weights the cost of a new business
Break-even analysis
Average avoidable cost per unit
Break-even price
sometimes called retrospective cost
sunk cost
two partners may able to work most efficiently by cooperating
post investment hold up
often called dismal science
economic
is a term coined by Scottish essayist and historian thomas Carlyle
dismal science
cose of a single firm, selling a single product at a single price
simple pricing
consumer purchase more as price fall
first law of demand
relationship between the price and the number of purchases made by this group of consumer
aggregate or market demand curve
deman curve present seller with a dilemma
marginal analysis of pricing
measure the sensitivity of quantity demanded to price change
price elasticity
5 factors that affect demand
- product with close substitutes have more elastic demand
- demand for an individual brand is more elastic than industry aggregate demand
- product with many complements have elastic demand
- in long run, demand curve become more elastic
- as price increases, demand become more elastic
measures the change in demand arising from changes in income
income elasticity of demand
pricing strategy in which company add as markup to the price of a product over the cost of production and manufacturing
cost based pricing
where it is the price point at which the total profit of the seller is maximized
optimal price
refers to increase in production cost generated by the production of additional product unit
marginal cost
often arise when more workers, or any variable input, must share fixed amount of a complementary input
bottlenecks
production becomes more efficient as the number of goods being produced increases
economies of scale
Important input to the production process
management
characteristics of many processes
learning curves
if the cost of producing two products jointly is less than the cost of producing those two products separately, then there are ____
economies of scope
if the cost producing two products together is higher than the cost of producing them separately
diseconomies of scope
