251Ch1lecture3Notes

251Ch1lecture3Notes - Cost of $90,000 job = $80,000 $10,000...

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8/21/2011 1 Chapter 1: What is Economics? Lecture 3: Opportunity Costs Ch1: What is Economics? 2 Economic Cost Opportunity cost = value of the best alternative • Explicit costs = monetary expenses • Implicit costs = value of forgone alternatives Ch1: What is Economics? Lecture 3: Opportunity Costs 3 Economic cost example #1 • Example: Job offers $70,000 $80,000 $90,000 Assume jobs are same except in salary Ch1: What is Economics? Lecture 3: Opportunity Costs 4 Economic cost example #1, continued Benefit of $70,000 job = $70,000 Cost of $70,000 job = $90,000 $-20,000 Benefit of $80,000 job = $80,000 Cost of $80,000 job = $90,000 $-10,000 Benefit of $90,000 job = $90,000
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Unformatted text preview: Cost of $90,000 job = $80,000 $10,000 Ch1: What is Economics? Lecture 3: Opportunity Costs 5 Economic Cost example #2 Even free goods have an economic cost Free gas Ch1: What is Economics? Lecture 3: Opportunity Costs 6 Economic cost example #3: Costs of college Expense Tuition Forgone wages Textbooks Room and board Entertainment Fees Transportation Economic cost? Yes Yes Yes No ( sunk cost = irreversible cost) No Yes ? 8/21/2011 2 More sunk cost examples 1) Waiting for a table in a restaurant 2) Cost of car ownership Ch1: What is Economics? Lecture 3: Opportunity Costs 7...
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251Ch1lecture3Notes - Cost of $90,000 job = $80,000 $10,000...

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