econ220ip1 - Running head: MICROECONOMICS UNIT 1...

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Running head: MICROECONOMICS UNIT 1 Microeconomics Unit 1 IP <removed to preserve my anonymity> AIU Online – Fall 2011 1
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MICROECONOMICS UNIT 1 Abstract Within this paper, we will be exploring the concept of opportunity cost. This includes defining, and providing example of, opportunity cost. Next, comparative and absolute advantage will be defined and compared. Finally, we will explore how comparative and absolute advantage could be reflected in current society. 2
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MICROECONOMICS UNIT 1 Exploration of Economic Cost and Advantage Scenarios Exploring the first of the three focus areas of this text, opportunity cost, the important factor to remember is that the opportunity cost of an action encompasses both the Implicit (not requiring money payment) and Explicit costs (requiring money payment) within it (California State University, 2008). The following table will serve as the basis of data points to be used in all calculations within this section: Questions Based On The Data (and Associated, Not Shown Data) From The Table 1. What is Michelle’s opportunity cost of producing potatoes? Potatoes Chickens Michelle 200 50 James 80 40 3
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MICROECONOMICS UNIT 1 To calculate Michelle’s opportunity cost of producing potatoes, we compute the following based on the numbers in the table: 50/200 = 1/4. This calculation shows that Michelle would need to sacrifice 1/4 chicken to produce a potato (Opalat, 2011). It should be noted that since its impossible to produce 1/4 of a chicken, the fraction is merely provided to allow for a valid opportunity cost determination. 2.
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This note was uploaded on 01/08/2012 for the course ECON ECON220 taught by Professor Opalat during the Summer '11 term at AIU Online.

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econ220ip1 - Running head: MICROECONOMICS UNIT 1...

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