Chap006.1 - Perfectly Competitive Supply The Cost Side of...

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1 Perfectly Competitive Supply: The Cost Side of The Market Chapter 6: Perfectly Competitive Supply Slide 2 Thinking About Supply: The Importance of Opportunity Cost ± How much time should Harry spend recycling soft drink containers? ± Harry is choosing between washing dishes for $6/hour and collecting containers at 2 cents each. ± Opportunity cost of collecting cans is $6/hour. Chapter 6: Perfectly Competitive Supply Slide 3 Recycling Search time (hours/day) 00 16 0 0 21 , 0 0 0 31 , 3 0 0 41 , 5 0 0 51 , 6 0 0 Total number of containers found Additional number of containers found 600 400 300 200 100 Chapter 6: Perfectly Competitive Supply Slide 4 Thinking About Supply: The Importance of Opportunity Cost ± Costs and Benefits z 1 hour collecting cans = (600)(.02) = $12 z Benefit ($12) > Opportunity Cost ($6) z 2nd hour benefit ($8) > Opportunity Cost ($6)
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