Chapter 1 Flashcards
(12 cards)
Accounting Profits
The total amount of money taken in from Sales (Total Revenue = Price x Qty Sold), minus the dollar cost of producing goods or services.
Economic Profits
The difference between total revenue and total opportunity cost.
Economics
The science of making decisions in the presence of scarce resources
Incremental Cost
The additional costs that stem from a yes-or-no decision
Incremental Revenue
The additional Revenues that stem from a yes-or-no decision
Manager
a person who directs resources to achieve a stated goal
Managerial Economics
The study of how to direct scare resource in the way that most efficiently achieves a managerial goal
Marginal Benefit
The change in total benefits arising from a change in the managerial control variable Q
Net Present Value (NPV)
The present value of the income stream generate by a project, minus the current cost of the project
Opportunity Cost
The explicit cost of a resource plus the implicit cost of giving up its best alternative use
Present Value
The amount that would have to be invested today at the prevailing interest rate to generate the given future value.
Time value of money
The fact that $1 today is worth more than $1 received in the future
