LindsayMitchell_Unit1Project - Lindsay Mitchell BU204-07...

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Lindsay Mitchell BU204-07 May 3, 2010 Unit 1 Project P2. Describe some of the opportunity costs when you decide to do the following: A. Attend college instead of taking a job: A loss of potential current income, loss of experience that could lead to income in the future. Opportunity cost is also what you would pay for tuiton, books, housing, etc. B. Watch a movie instead of study for an exam: You could potentially get a lower grade which could cause the loss of scholarship or even cause you to flunk out of school and with that there can be an associated loss of future income. C. Ride the bus instead of driving your car: You loose the freedom to choose your own schedule, possible loss of alone time and instead be surrounded by strangers, potential loss of safety or loss of good health i.e. get robbed, catch a cold, etc. and the price of bus fair. P5. In the following examples, state how you would use the principle of marginal analysis to make a decision. A. Deciding how many days to wait before doing your laundry: In waiting an extra day, you are making a decision based on differences between marginal cost and marginal benefits. In this case the MC is the use of time and resources such as detergent while the MB is clean clothes. Whichever one outweighs the other is what should be chosen. B. Deciding how much library research to do before writing your term paper: Doing library research has both marginal benefit and marginal cost, the benefit is gaining more knowledge on the topic which you need to write the paper, while the cost of the research is that you wont have as much time to write the paper. If you don’t do enough research then you may not have enough information to write an adequate paper making the MB of doing the research greater than the MC of doing
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This note was uploaded on 05/18/2010 for the course BU204 MACROECONO taught by Professor Joseruiz during the Spring '09 term at Kaplan University.

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LindsayMitchell_Unit1Project - Lindsay Mitchell BU204-07...

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