Opportunity Cost

1
Opportunity Cost

• Jeff Holcombe
• Amanda Mitchell
• George Washington
• Brad Davidson
• Rodriguez Jones
• Chris Johnson

2
What is opportunity cost?

• Opportunity cost is the cost (sacrifice) incurred
  by choosing one option over an alternative one
  that may be equally desired. Thus, opportunity
  cost is the cost of pursuing one choice instead
  of another.
• Opportunity cost is not restricted to monetary or
  financial costs the real cost of output forgone,
  lost time, pleasure or any other benefit that
  provides utility should also be considered.
• Opportunity cost is a key concept in economics
  because it implies the choice between desirable,
  yet mutually-exclusive results. It has been
  described as expressing "the basic relationship
  between scarcity and choice.

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Individuals Opportunity Cost
4
Goin 2 Skewel

• Higher earnings
• Increased labor force participation
• Increased likelihood of voting/registering to
  vote.
• Sleeping in late
• Playing WoW.
• Hanging out with other non-college buds
• Being able to say hello to your parents every
  morning.
• Playing WoW.

5
Stock Vs. Bank account
Vs.
- One who invests 10,000 in a stock denies
oneself the interest that one can easily earn by
leaving the 10,000 dollars in a bank account
instead.
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Company Opportunity Cost

• Renting
• Owning
• Demolished for alternative uses
• Such as parking lots, strip malls, etc.

7
Global Opportunity Cost

• A global aspect of opportunity cost is the
  opportunity cost faced by a nation (or economy)
  as a whole.

8
Bridge 9340 in Minneapolis

• Cost of reinforcing Bridge 9340 in Minneapolis VS
  the devastating aftermath
• Design concerns from contracted company.
• Passing inspections

9
Rain Forest Lumber Vs. Rain Forest Species

• Deforestation of rain forests for lumber VS
  Existence of several species native only to those
  regions.
• Finding a balance.

10
Iraq War

• The financial cost of war could be prohibitive
• The cost in lives and dollars of containment is
  higher than that of war
• Torching of oil fields, leading to even higher
  oil prices, world recession, and an environmental
  disaster

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Iraq War - Estimated Costs

• Ultra-conservative Pentagon estimate 600
  billion and counting
• (note this Honest Abe estimate categorically
  excludes extras such as operations in the war
  zone, support for troops, repair or replacement
  of equipment, reservists salaries, special
  combat pay for regular forces and some care for
  wounded veterans)
• Congressional Budget Office 1 to 2 TRILLION
• Nobel-prize winning economist Joseph E. Stiglitz
  over 4 TRILLION

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Individuals Opportunity costfor Gas

• Eating out at restaurants ? preparing meals at
  home
• Workout at gym ? running around neighborhood
• Shopping at the malls ? shopping on-line
• Going on vacation ? staying around hometown

13
Driving Vs. Public Transportation

• Heavy traffic
• Lack of parking
• Cost of gas
• Direct location
• 90 minutes to destination

• Cost of fee
• Time of waiting on bus
• Changing routes
• 40 minutes to destination

14
Driving vs. Clean Air

• Gas Driving cars anywhere at anytime VS Clean
  air and good health

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Conclusion

• In all of these cases, a choice between two
  options must be made. It would be an easy
  decision if you knew the end outcome.
• Globally, we must look at all of our individual
  choices and continue to try and foresee the
  potential consequences of our decisions, to limit
  the impact that we have on our physical, and
  social, environment.