microbook_3e-page5 - x If I spend 300 hours preparing 30...

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Scope & Method of Economics Why should I study economics? x To learn a way of thinking! Hopefully, you’ll learn to use three key concepts in your daily lives: o efficient markets o marginalism and o opportunity cost Efficient markets x Profit opportunities are rare because everyone is looking for them. x Efficient markets eliminate profit opportunities immediately. x Ex. You’ll never find a good parking space, because if there was a good one, it would already be taken before you got there. Marginalism Average cost total cost divided by quantity
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Unformatted text preview: x If I spend 300 hours preparing 30 lessons for you: x You had better study! x My average cost per lesson is 10 hours. Sunk cost – costs that can no longer be avoided because they have already been “sunk” x If I teach this class again next semester, I will have already sunk 300 hours into preparation. Marginal cost – cost of producing one more unit x Next semester I can recycle my notes, so my marginal cost per lesson will equal 75 minutes. x Compare that with my current 10 hours! Page 5...
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This note was uploaded on 12/29/2011 for the course ECO 311 taught by Professor Willis during the Fall '10 term at SUNY Stony Brook.

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