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In microeconomic theory, opportunity cost, or alternative cost, is the loss of potential gain from other alternatives when one particular alternative is chosen over the others. Microeconomics Topic 1: “Explain the concept of opportunity cost and explain why accounting profits and economic profits are not the same.” Reference: Gregory Mankiw’s Principles of Microeconomics, 2nd edition, Chapter 1 (p. 3-6) and Chapter 13 (p. 270-2). Abilities vs Abilities The opportunity cost of after school violin lessons at a particular school is the ability to join other after school activities such as baseball or the chess club. Opportunity cost measures the cost of any choice in terms of the next best alternative foregone.. Work-leisure choices: The opportunity cost of deciding not to work an extra ten hours a week is the lost wages foregone.If you are being paid £7 per hour to work at the local supermarket, if you take a day off from work you might lose over £50 of income Opportunity cost is a term economists use to describe the relationship between what an item adds to your life, and how much it might cost you by not having it, taking into account your other options. If microeconomics isn’t you’re thing try this course in micro and macro-economics for a refresher. To demonstrate the concept behind an opportunity cost, we’ll use the […] Opportunity cost and a free good. Clearly, the opportunity costs of waiting time can be just as substantial as costs involving direct spending. If there is no opportunity cost in consuming a good, we can term it a free good. The theory of comparative advantage states that countries should specialise in producing goods where they have a lower opportunity cost. Opportunity cost is the potential loss owed to a missed opportunity, often because somebody chooses A over B, the possible benefit from B is foregone in favor of A. So the opportunity cost of buying an SUV includes an alternative option, such as buying a less expensive sedan. $2 c. $18 d. $10 e. $0 Question 6 Tom owns a bakery and decides to bake a few extra loaves of bread each morning. The opportunity cost of volunteering is: Select one: a. .Opportunity cost is a theory in microeconomics that measures the value of two alternative choices to show what will be lost in the pursuit of one of these options. The idea behind opportunity cost is that the cost of one item is the lost opportunity to do or consume something else; in short, opportunity cost is the value of the next best alternative. If he is making a decision "at the margin," it implies that he is comparing: Select one: a. Learn vocabulary, terms, and more with flashcards, games, and other study tools. The opportunity cost of the new product design is increased cost and inability to compete on price. As production of food increases, production of clothing declines and vice versa. Since people must choose, they inevitably face trade-offs in which they have to give up things they desire to get other things they desire more. Accordingly, the opportunity cost of delays in airports could be as much as 800 million (passengers) × 0.5 hours × $20/hour—or, $8 billion per year. Start studying Principles of Microeconomics Midterm 1. What is opportunity cost? $8 b. Opportunity cost is measured by the slope of the PPC (the change in along y-axis divided by the change along the x-axis). This represents increasing opportunity cost. Opportunity Cost Video The PPC is "bowed outward" (concave) from the origin. Opportunity cost and comparative advantage. 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