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ECON 202
Lecture 6 Vocab
| Term | Definition |
|---|---|
| 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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