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VCC Economics Assignment 02

VCC Economics Assignment 02 - something better than someone...

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Don Uhrig Principles of Economics-Macro, ECO-2013, Su 1700-1945 Professor Dr. Jim Chase Assignment #2 Define Opportunity Cost: Simply speaking, opportunity cost is the benefit that you might have gained from choosing the next-best alternative. Opportunity cost takes into account the costs and benefits of all other options and converts these alternative benefits into costs of the decision you are now making. What this means to me is that there is an opportunity cost for attending college vice working full- time. If I were working full time, I would be making perhaps $50K. While in college for the next four years, my stipend is $30K per year. Naturally, I anticipate earning greater than $50K upon graduation. But for now, my opportunity cost is $20K – the difference between income sources. $20K is the benefit that I might have gained from choosing the next-best alternative. What is the difference between absolute and comparative advantage: Comparative advantage is skill level based advantage in the marketplace. The ability to “do”
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Unformatted text preview: something better than someone else. An individual or a business becomes skilled by doing something over and over, perfecting their skills or techniques to be able to produce their service or product with the highest quality at the lowest cost. Absolute advantage is a geographical related leg-up on the competition. A business or service physical location is what gives them an absolute advantage. Factors such as soil, climate, etc. are leading contributors to absolute advantage. For example: Many companies grow Coffee. However, the Costa Rican Peaberry Coffee, which has a beautiful aroma and a sweet taste, can ONLY be grown in Costa Rica. Coffee trees transplanted from Costa Rica to other location do not produce the same flavor. Therefore, Costa Rica has an absolute advantage in the Peaberry coffee market. No other producer can compete no matter how efficient or skilled they are....
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