ch 8.txt

  1. internal benefits
    the benefits of a project from the perspective of the economic actor making the decisions
  2. external benefits
    the benefits of a project that accrue to persons, or entites such as the environment, that are not among the economic actors directly repsonsible for the activity
  3. net benefits
    total benefits minus total cost. A general guideline for socially beneficial production is to choose productive activities that maximize net benefits
  4. cost/benefit analysis
    a procedure, often used by governements, for attempting to determine the net benefits of the proposed projects
  5. revenue
    the amount recieved from sales of produced goods and services
  6. economic profit
    revenue less economic costs
  7. marginal benefit
    the benefit that accrues from producing the last unit of output
  8. marginal revenue
    the revenue recieved from the last unit sold. Given certain assumptions, profits are maximized when marginal cost equalsmarginal revenue (the revenue from the last unit sold). This priniciple is abbriviated as "set MC = MR." for price-taking firms, the profit-maximization principle can be abbreviated as "set MC = P."
  9. convexity
    math term used to describe the special assumptions neccessary for marginal thinking to lead to maximization of net benefits. With convexity, net benefits can be maximized by taking incremental steps along a smooth path
  10. discrete decisons
    desicions that involve "jumps" between different distict choices
  11. nonconvexity
    a math term used to describe a number of situations in which marginal thinking is an inadequate quide to maximize of net benefits
  12. static analysis
    analysis that does not take into account the passage of time
  13. dynamic analysis
    analysis that takes into account the passage of time
  14. sunk cost
    an expenditure that was made or commited to in the past and is now irreversible
  15. path dependence
    a condition that exists when economic developments depend on particularities of past developements - tha is, when "history matters"
  16. switching costs
    the transaction costs associated with a change in production technology
  17. network externalities
    (in production) a property that a particular tech exhibits when it is advantages to adopt that tech because other economic actors have adopted it
  18. capital constraint
    (in production) a situation in which an inablilty to obtain financing imposes limits on produciton decsions
  19. break-even price
    the price at which a profit-maximizing firm makes zero economic profits
Card Set
ch 8.txt
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