# Micro Chapter 3 Exam 1

 Opportunity Cost Its the sum of explicit cost and implicit cost Explicit cost actual outlay of money implicit cost forgone value of best alternative activity Accounting profit business's revenue minus explicit costs and depreciation Economic profit business's revenue minus Opp Cost of its resources Marginal Analysis Relevant to "how much" decisionsIts an analysis at edge, comparing additioal benefit to additional cost of one more unit of consumption (or production) Marginal benefit the additonal benefit earned by consuming (producing) one more unit of g/s MB of Babett decreases as the wing-portion size increases since customers are willing to pay less additional amount of money for each additional chicken wing included in the serving. marginal cost the additonal cost incurred by consuming (producing) one more unit of g/s Optimal Quantity its the quantity that generates the maximum possibe total net gainand the total et gain i maximized when Marginal Benefit = Marginal Equivalently, it is the quantity at which marginal benefit and marginal cost curves intersect. Do we care about sunk cost? sunk cost: a cost that has already been incurred and non-recoverableSunk cost should be ignored in decisions about future actions (opportunity cost) Present Value What is \$X realized t years in the future worth today?\$V x (1+r) t = \$X\$V = \$X/ (1+ r)twhere \$V is the present value f \$x realized t years in the future at r, the annual interest rate Nwt present Value (=NPV) NPV of a project is the present value of current and future benefits - the presen value of current and future costs AuthorAnonymous ID131211 Card SetMicro Chapter 3 Exam 1 DescriptionOpportunity cost/ marginal analysis Updated2012-01-28T21:05:25Z Show Answers