economic rent
price paid for the use of land and other natural resources that are completely fixed in total supply.
incentive function
the high price provides an incentive to offer more of the resource, wheres a low price prompts resource suppliers to offer less. Applies to non-land resources
single-tax movement
economic rent could be heavily taxed, or even taxed away, without diminishing the available supply of land or, therefore, the productive potential of the economy as a whole.
loanable funds theory of interest
explains the interest rate not in terms of the supply of and demand for funds available for lending (and borrowing)
time-value of money
the idea that a specific amount of money is more valuable to a person the sooner it s obtained.
future value
the amount to which some current amount of money will grow as interest compounds over time
present value
todays value of some amount of money to be received in the future.
pure rate of interest
approximated by the interest paid on long-term, virtually risk-less securities such as long-term bonds of the U.S. government.
nominal interest rate
rate of interest expressed in dollars of current value.
real interest rate
rate of interest expressed in purchasing power.
usury laws
laws which specify a maximum interest rate at which loans can be made. (price ceilings)
explicit costs
payment made by the firm to outsiders.
implicit costs
monetary income the firm sacrifices when it uses resources that it owns, rather than supplying those resources to the market.
economic or pure profit
what remains after all of the costs.
normal profit
minimum payment necessary to the retain the entrepreneur in his or her current line of production.
static economy
one in which the basic forces such as resource supplies, tech knowledge, and consumer tastes are constant and unchanging.
insurable risks
risks the entrepreneur does not have to risk
uninsurable risks
uncontrollable and unpredictable changes in the demand and supply conditions facing the firm.