, 10/18/24, 2:49 PM Managerial Economics and Business Strategy Midterm /Managerial Economics & Business Strategy Michael Baye 9th Editio…
The present value of the income stream generated
net present value
by a product minus the current cost of the project.
Takes into account the long-term impact of
value of a firm
managerial decisions on profits.
States that optimal managerial decisions involve
managerial analysis comparing the marginal (or incremental) benefits of
a decision with the marginal (or incremental) costs.
The change in total benefits arising form a change in
marginal benefit
the managerial control variable, Q.
The change in total costs arising from a change in
marginal cost
the managerial control variable, Q.
The additional revenues that stem from a yes-or-no
incremental revenues
decision.
The additional costs that stem from a yes-or-no
incremental costs
decision.
Costs that change with changes in output; include
variable costs
the costs of inputs that vary with output.
A function that defines the minimum possible cost of
short-run cost function producing each output level when variable factors
are employed in the cost-minimizing fashion.
Fixed costs divided by the number of units of
average fixed cost
output.
Variable costs divided by the number of units of
average variable cost
output.
marginal (incremental) The cost of producing an additional unit of output.
cost
sunk cost A cost that is forever lost after it has been paid.
Costs are a cubic function of output; provides a
cubic cost function reasonable approximation to virtually any cost
function.
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