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BUEC 232 (25)
Chapter 1

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Simon Fraser University
Business Economics
BUEC 232
George Zhang

Chapter 1 Key Terms • Manager: A person who directs resources to achieve a stated goal • Economics: the science of making decisions in the presence of scarce resources • Managerial economics: the study of how to direct scarce resources in the way that most efficiently achieves a managerial goal • Economic profits: the difference between total revenue and total opportunity cost • Opportunity cost: the cost of the explicit and implicit resources that are forgone when a decision is made • Present value: the amount that would have to be invested today at the prevailing interest rate to generate the given future value • Net present value: the present value income stream generated by a project minus the current cost of the project • Marginal benefit: the change in total benefits arising from a change in the managerial control variable Q. • Marginal cost: the change in total costs arising from a change in the managerial control variable Q. • Incremental revenues: the additional revenues that stem from a yes-or-no decision • Incremental costs: the additional costs that stem from a yes-or-no decision www.notesolution.com Chapter 1 Principles • Profits are a signal o Profits signal to resource holders where resources are most highly valued by society • Profit maximization
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