De La Torre, Noel E.

Econ14

Assignment

Define the following:

a. Wages - These represent payment made to labor for its contribution in production.

b. Rent - This refers to the payment for the use of land owned by another.

c. Taxes - Compulsory payments which must be paid to the government consisting of different types
constitute costs to the business

d. Opportunity Cost - Opportunity costs represent the potential benefits an individual, investor, or
business misses out on when choosing one alternative over another. The idea of opportunity costs is a
major concept in economics. Because by definition they are unseen, opportunity costs can be easily
overlooked if one is not careful. Understanding the potential missed opportunities foregone by choosing
one investment over another allows for better decision-making.

e. Interest - It is a price paid for the use of money capital borrowed from another.

f. Variable Costs - A variable cost is a corporate expense that changes in proportion to production
output. Variable costs increase or decrease depending on a company's production volume; they rise as
production increases and fall as production decreases. Examples of variable costs include the costs of
raw materials and packaging. A variable cost can be contrasted with a fixed cost.

g. Diminishing Returns. - The law of diminishing marginal returns states that adding an additional factor
of production results in smaller increases in output. After some optimal level of capacity utilization, the
addition of any larger amounts of a factor of production will inevitably yield decreased per-unit
incremental returns.For example, if a factory employs workers to manufacture its products, at some
point, the company will operate at an optimal level; with all other production factors constant, adding
additional workers beyond this optimal level will result in less efficient operations.