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S&P 500: The abbreviation for the Standard & Poor's 500, an index of the prices of 500 corporate stocks traded on the New York Stock Exchange. It includes an assortment of stocks for industrial, transportation, and utility companies. It also includes a larger number of stocks than the comparable Dow Jones composite index, which means it's often considered a better measure of the overall performance of the stock market. Less commonly publicized are separate Standard & Poor's indexes for industrial, transportation, utility, and financial stocks.
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Lesson 13: The Firm | Unit 2: Objectives
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Page: 10 of 24
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Topic:
Natural Selection
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- If real world firms DON'T seek to maximize profit, then why do pointy-headed economists assume that firms DO seek to maximize profit when analyzing firm behavior?
- The answer lies with the concept of natural selection.
- Natural selection is the notion that firms best suited to the economic environment on the ones that tend to survive.
- It's probably true that individual firms do not consciously try to maximize profit.
- But it's also true that decisions the surviving firms make end up with the same results as if the firms DID consciously try to maximize profit.
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MARGINAL REVENUE The change in total revenue resulting from a change in the quantity of output sold. Marginal revenue indicates how much extra revenue a firm receives for selling an extra unit of output. It is found by dividing the change in total revenue by the change in the quantity of output. Marginal revenue is the slope of the total revenue curve and is one of two revenue concepts derived from total revenue. The other is average revenue. To maximize profit, a firm equates marginal revenue and marginal cost.
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Ragnar Frisch and Jan Tinbergen were the 1st Nobel Prize winners in Economics in 1969.
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"Plans are only good intentions unless they immediately degenerate into hard work." -- Peter Drucker, management consultant
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CCAPM
Consumption-Based Capital Asset Pricing Model
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