| A | B |
|---|
| trade-off | giving up one alternative good or service for another |
| opportunity cost | the cost of the next-best use of time or money after making your first choice |
| option | alternative or choice |
| fixed cost | an expense that does not change no atter how much a business produces |
| vary | to change |
| variable cost | an expense that changes depending on how much a business produces |
| total cost | combination of all fixed and variable costs |
| marginal cost | the additional or extra opportunity cost associated with each increase in expenses caused by producing another unit of something. ie. cost of paying employees overtime if business stays open an extra hour |
| revenue | the money a business receives from selling its goods or services |
| marginal revenue | additional income received from each increase of one unit in sales. |
| benefit-cost analysis | compares the size of the benefit with the size of the cost by dividing the two |
| utilities, hourly wages, charitable contributions | examples of variable costs |
| administrative salaries, rent, weekly cleaning fee | examples of fixed costs |
| profit/loss | total revenue minus total cost = |
| when there is one item or issue to consider | when to use marginal analysis |
| when there are two or more issues to consider | when to use a benefit cost analysis |
