B201 ppt lecture week 2 Opportunity Costs 1

B201 ppt lecture week 2 Opportunity Costs 1 - vacuuming:...

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Opportunity Costs Absolute and Comparative Advantage
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Opportunity Cost The value of the very next best option If you had $250, you would buy an iPod, or fly to Lake Tahoe or fix your cay (in that order) If you choose the iPod, what is your opportunity cost? -- ANSWER: LAKE TAHOE
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Bob has been given two job offers. A job at the coolest radio station in town that pays $30,000 or a job at an accounting firm that pays $45,000. What is Bob’s opportunity cost of taking the radio station job? A) $15,000 B) $45,000 C) $30,000 D) $0
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Example
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How to Find Opportunity Cost: Cost of cooking Chicken
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Opportunity cost of Vacuuming House
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What does it mean You have a lower opportunity cost of cooking chicken: 3 houses vacuumed. Marty’s opportunity cost is 4.3 houses vacuumed. You have a comparative advantage in cooking chicken!
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And… Marty has a lower opportunity cost of
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Unformatted text preview: vacuuming: 0.23 chickens. It costs you 0.3 chickens. Marty has a comparative advantage in vacuuming. Marty should vacuum. Although Marty is better at everything, he is more better at vacuuming and you are less worse at cooking chickens. Your Turn Sam and Vlad are mechanics at J.J Garage. They change oil and fix flat tires. Sam can change oil in 45 minutes and fix a flat in 20 minutes. Vlad can change oil in 38 minutes and fix a flat in 13 minutes. Who should do which task? (Or should Vlad just take over the whole garage and let Sam eat donuts?) What is Sams opportunity cost of changing oil? A) 20 minutes B) 45 minutes C) 0.44 tires D) 2.25 tires Why? And Vlad? This expands to the second task as well. So Sam should change tires and Vald should change oil....
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B201 ppt lecture week 2 Opportunity Costs 1 - vacuuming:...

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