Campbell R. McConnell,
University of Nebraska, Lincoln
Stanley R. Brue,
Pacific Lutheran University
Thomas P. Barbiero,
Ryerson Polytechnic University
| Economic (pure) profit | The total revenue of a firm less its economic costs (which includes both explicit costs and implicit costs); also called above normal profit.
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| Economic rent | The price paid for the use of land and other natural resources, the supply of which is fixed (perfectly inelastic).
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| Explicit costs | The monetary payments a firm must make to an outsider to obtain a resource.
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| Implicit costs | The monetary income a firm sacrifices when it uses a resource it owns rather than supplying the resource in the market; equal to what the resource could have earned in the best-paying alternative employment; includes a normal profit.
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| Incentive function of price | The inducement that an increase in the price of a commodity gives to sellers to make more of it available (and conversely for a decrease in price), and the inducement that an increase in price offers to buyers to purchase smaller quantities (and conversely for a decrease in price).
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| Insurable risk | An event that would result in a loss but whose frequency of occurrence can be estimated with considerable accuracy; insurance companies are willing to sell insurance against such losses.
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| Loanable funds theory of interest | The concept that the supply of and demand for loanable funds determine the equilibrium rate of interest.
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| Nominal interest rate | The interest rate expressed in terms of annual amounts currently charged for interest and not adjusted for inflation.
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| Normal profit | The payment made by a firm to obtain and retain entrepreneurial ability; the minimum income entrepreneurial ability must receive to induce it to perform entrepreneurial functions for a firm.
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| Pure rate of interest | An essentially risk-free, long-term interest rate not influenced by market imperfections.
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| Real interest rate | The interest rate expressed in dollars of constant value (adjusted for inflation); equal to the nominal interest rate less the expected rate of inflation.
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| Single-tax movement | A movement spearheaded by Henry George in the late nineteenth century to make taxes on rental income the only tax levied by government; few advocates remain.
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| Static economy | An economy in which resource supplies, technological knowledge, and consumer tastes are constant and unchanging.
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| Uninsurable risk | An event that would result in a loss and whose occurrence is uncontrollable and unpredictable; insurance companies are not willing to sell insurance against such a loss.
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| Usury laws | State laws that specify the maximum legal interest rate at which loans can be made.
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2002 McGraw-Hill Higher Education