ECON CH1.txt

  1. What is managerial economics?
    Managerial economics is the application of microeconomic theory to business problems
  2. Opportunity Cost
    What a firm's owners give up to use resources to produce goods or services.
  3. Market-Supplied Resources
    Resources owned by others and hired, rented, or leased in resource markets.
  4. Owner-Supplied Resources
    Resources owned and used by a firm.
  5. Total Economic Cost
    Sum of opportunity costs of market-supplied resources plus opportunity costs of owner-supplied resources.
  6. Explicit Costs
    Monetary opportunity costs of using market-supplied resources.
  7. Implicit Costs
    Nonmonetary opportunity costs of using owner-supplied resources.
  8. Equity Capital
    Money provided to businesses by the owners.
  9. Economic Profit
    The difference between total revenue and total economic cost

    Economic Profit = Total Revenue - Explicit Costs - Implicit Costs
  10. Accounting Profit
    The difference between total revenue and explicit costs.

    Accounting Profit = Total Revenue - Explicit Costs
  11. Value of a Firm
    The price for which the firm can be sold, which equals the present value of future profits.
  12. Risk Premium
    An increase in the discount rate to compensate investors for uncertainty about future profits.
  13. Principle-Agent Problem
    The conflict that arises when the goals of management (agent) do not match the goals of hte owner (principle)
  14. 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
  15. 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
  16. Price -Setter
    A firm that can raise its price without losing all of its sales
  17. Market Power
    A firm's ability to raiser prices without losing all sales
  18. Market
    Any arrangement through which buyers an dsellers exchange anything of value
  19. Transaction Costs
    Costs of making a trnsaction happen, other than the price of good or service itself
  20. Market Structure
    A set of market characteristics that determines the economic environment in which a firm operates
  21. Globalization of Markets
    Economic integration of markets located in nations around the world
Card Set
ECON CH1.txt
ECON Chapter 1