AREC 202 Lecture Notes - Lecture 3: Sunk Costs, Opportunity Cost
29 Aug 2016
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Document Summary
Principle 10: one person"s spending is another person"s income. Principle 11: overall spending sometimes gets out of line with the economy"s productive capacity. Because resources are scarce the true costs of anything is its opportunity cost. What you must give up to get something. The missed opportunity to consider is the next best alternative. The opportunity cost of something is often more than monetary costs. A cost that requires an outlay of money. Dollar value of foregone benefits, does not require an outlay of money. A cost that has already been incurred and is not recoverable. A sunk cost should be ignored in decisions about future actions. Revenue minus the explicit costs and depreciation. Revenue minus the opportunity costs of its resources. Shows a more complete picture of costs. This is the profit we will always use. Value of assets owned by individual or firm. Opportunity cost of the use of one"s own capital.
