Card Set Information
Economics Chapter 11
Weighing the costs and benefits of an action in order to maximize the net benefit from the action.
Satisfaction realized from the consumption of a good or service or taking an action.
The cost of acquiring a good or service or taking an action measured in terms of the value of the oppurtunity or alternative forgone.
Teh change in total satisfaction from consuming an additional unit of a good, service, or activity.
Total Benefit (Total Utility)
The total amount of satisfaction recieved from consumiong a specified number of units of a good, service, or activity.
Law of dimishining marginal utility
As additional units of an item are consumed, beyond some point each successive unit of the item consumed will add less to total utility than was added by the unit consumed just before it.
The cost of producing a specified number of units of a good, service, or activity.
The change in total cost from each additional unit of a good, service, or activity produced.
The resultg when total cost is subtracted from total benefit.
Net Benefit maximizing rules
Net benefit is maximized where total benfit exceeds total cost by the greatest amount or where marginal benfit equals marginal cost.
Payments that a business makes to aquire factos of production, such as labor, raw materials, and machinery.
The oppurtunity costs to business owners from using their resourses in the business rather than in an alternative oppurtunity; must be recovered to keep the busisness in operation; normal profit.
Profit necessary to recover implicit costs and keep a business in operation; considered to be an economic cost of production.
Economic Cost of Production
Includeds all explicit and implict costs of producing a good or service.
Profit beyond normal profit: not considered a cost of production.
Revenue recieved from selling a certain quantity of an item: calculated by multiplying the price of an item by the quantity demanted at the price.
The change in toatal revenue when one more unit an item is demanded
Profit or loss
The result when a business subtracts its toatal cost from its total revenue.
Profit Maximizing rules
Profit is maximized at the output level where total revenue exceeds total cost by the greateds amount, or where marginal revenue equals marginal cost.