AP Microeconomics / Unit 1: Basic Economic Concepts
1.5 Cost-Benefit Analysis
Notes
Rational decisions compare costs and benefits, including explicit (money) and implicit (opportunity) costs.
- Sunk costs shouldn't affect future decisions.
Practice
You've paid for a nonrefundable concert ticket but now feel sick. The ticket price is a:
Can't be recovered.
The implicit cost of starting a business includes:
Opportunity cost.
A rational decision maker chooses an option when:
Net gain.
Ready for more? Take the Unit 1 test.