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ECON 202

Lecture 6 Vocab

productive resources; land, labor, capital, knowledge factors of production
any payment to a factor of production beyond its cost economic rent
a cost that one individual must pay to another in goods explicit cost
a cost thatn an individual does not pay to anyone else; time or waste implicit cost
includes the entrepreneur's opporrtunity costs normal profit
signal to producers what society values or doesn't value based on prices role of profits and losses
total revenue minus total explicit costs accounting profit
accounting profit minus implicit costs (opportunity costs) economic profit
a popular estimate of economic profit; equals the sum of invested capital and net working capital times the difference between return on capital adn the cost of capital econoomic value added (EVA)
profits earned by superior ability; a result of Ricardo's comparative advantage and similar to Porter's idea of competitive advantage in marketing and managment differential earnings
whatever is left when all contractecual claims are satisfied residual
an economic claimant who has no contractual claim on resources; business owners are usually this residual claimant
economic payment (in excess of opportunity cost) to owners of land and physical capital rent
infrastructure, buildings, equipment, and tools physical capital
economic payment to laborers wage
cash provided to a producer to finance payments to other resources, especially to purchase physical capital needed to produce goods; finance and economics refer to both debt and equity as capitatl financial capital
economic payment to debt capital; also called return on capital interest
economic payment to equity capital; also called return on capital profit
financial capital that is borrowed from contractual claimants debt capital
when a borrower fails to pay according to the terms of a debt ocntract default
when a borrower become sunable to repay debt capital as agreed insolvent
when a borrower become sunable to pay any claims; can be temporary illiquid
when a producer pays according to the terms of a debt ontract but violates some other part of a debt contract such as a minimum required return on assets or that the value of all assets must be greater than its liabilities technical default
the legal state of being unable to repay debts bankruptcy
financial capital (or the financial value of real property or service) that is contributed (donated) by producers who will ahve a residual claim on resources equity capital
the ratio of debt capitalto equity capital or of debt capital to total capital levearge
rate of interes or return that is paid to financial capital rate of return
where benefits equal costs break-even point
revenues equal expenses; no accounting profit or accounting loss accounting break-even
the difference between total revenues and total costs (profits) is always maximized where marginal revenue equals marginal cost; max (TR-TC) occurs where MR-MC profit maximization
Created by: nomad95



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