Opportunity Costs and Supply
Column 1
Column 2
Column 3
V Costs
V Opportunity
V Examples:
* The cost of going to college
* The cost of the Iraq war
* The cost of a babysitter in Irvine? Santa Ana?
V Sunk costs are irrelevant
* Examples:
V The value of...
* Costs are costs of an action - the cost of the class? No, The cost of giving the class to the college, the cost of the class to the student - of getting a C, an A, etc.
* The costs are incurred by a person.
V Producers' Costs
* The costs of resources are determined by what a resource can obtain from someone else.
* Resources have substitutes
* Skills make a worker more valuable to someone else.
* What does the NFL draft do to the cost of obtainint football players?
V Costs and Supply Decisions
* Costs that matter are marginal costs.
* Marginal costs rise
* Average costs are different and not useful for most decision-making processes.
*
* Quantity
Total
 Average
 Marginal
* Produced
Cost
 Cost
 Cost
* 0
$50
 -
 -
* 1
75
 $75.00
 $25
* 2
90
 45.00
 15
* 3
110
 36.67
 20
* 4
135
 33.75
 25
* 5
165
 33.00
 30
* 6
200
 33.33
 35
* 7
245
 35.00
 45
* 8
295
 36.88
 50
* 9
355
 39.44
 60
* 10
425
 42.50
 70
V What are the costs of an all-volunteer army vs. a conscripted army?
* Costs to whom? Congress? Taxpayers? The country generally? The soldier? The military?
* Do we want the lowest cost army?
* How to get it. Bribe people witht the lowest opportunity cost.
*
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V Elasticity of Supply
* The concept
* The coefficient
* The determinant of elasticity of supply: TIME
*
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V Costs as Justification
* Are costs opportunity costs or production costs?
* Questions: 2, 4, 9, 10, 12, 17, 18, 21, 22