The difference between total revenue and explicit costs.
Accounting Profit = Total Revenue - Explicit Costs
Value of a Firm
The price for which the firm can be sold, which equals the present value of future profits.
Risk Premium
An increase in the discount rate to compensate investors for uncertainty about future profits.
Principle-Agent Problem
The conflict that arises when the goals of management (agent) do not match the goals of hte owner (principle)
Moral Hazard
Exists when either part to an agreement has an incentive not to abide by all provisions of the agreement and one part cannot cost effectively monitor the agreement
Price-Taker
A firm that cannot set the price of the product it sells, since price is determined strictly by the market forces of demand and supply
Price -Setter
A firm that can raise its price without losing all of its sales
Market Power
A firm's ability to raiser prices without losing all sales
Market
Any arrangement through which buyers an dsellers exchange anything of value
Transaction Costs
Costs of making a trnsaction happen, other than the price of good or service itself
Market Structure
A set of market characteristics that determines the economic environment in which a firm operates
Globalization of Markets
Economic integration of markets located in nations around the world