Opportunity Cost The benefit forgone from not choosing the next best alternative ECON 162 9 9 15 Marginal Benefit vs Marginal Cost Explicit Costs Direct Costs Implicit Costs Opportunity Costs Indirect Production Possibilities Curves Frontiers PPC or PPF A model that shows the maximum combinations of two goods that can be produced given a certain quantity of resources and state of technology points on the PPC are always efficient Choices of a college student Academic Life studying measured in hours vs Social Life partying measured in beer drinking Example 1 Assume 10 hours day available 7 days a week 70 hours week 70 hours week 15 weeks semester 1050 hours semester Can drink 2 beers hour Can t drink and study at the same time Beer is FREE Points A B and C are EFFICIENT Points below the PPC are INEFFICIENT Points above the PPC are UNATAINABLE Slope of PPC Measurement of the opportunity cost of good on horizontal axis constant Question 5 B 2F 1C P 1F 2C F 120 C 120 Brownies Pudding 60 50 40 30 0 20 Flour in Brownies 120 100 Flour in Pudding 0 20 Flour 120 120 Chocolate in Brownies 60 Chocolate in Pudding 0 Chocolate 60
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