1. Chapter 5 Section 3
What are the advantages and disadvantages of buying something off of the Internet?

2. Measures of Cost
Fixed cost—the cost that a business incurs even if the plant is idle and output is zero
Also called overhead
Includes salaries paid to executives, rent payments, interest on borrowed money, and taxes
Variable cost—a cost that changes when the business rate of operation or output changes
Wage-earning workers, electric power charges, or freight shipping expenses

3. Total cost—sum of fixed and variable costs
Figure 5.6 on pg. 128
Marginal cost—the extra cost incurred when a business produces one additional unit of a product
Total cost divided by total products

4. Measures of Revenue Total Revenue Marginal Revenue
Number of units sold multiplied by the average price per unit
Marginal Revenue
Extra revenue associated with the production and sale of one additional unit of output
Dividing the change in total revenue by the marginal product

5. Marginal Analysis
Comparing the extra benefits to the extra costs of an action (marginal costs vs. marginal revenue)
Break-even point
Total product the business needs to sell in order to cover its costs
Profit maximizing is reached when marginal costs and marginal revenue are equal
Figure 5.6 on pg. 128