Opportunity Cost Chapter 1.3. Warm-Up In this clip from the movie, Along Came Polly, what does...
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Transcript of Opportunity Cost Chapter 1.3. Warm-Up In this clip from the movie, Along Came Polly, what does...
![Page 1: Opportunity Cost Chapter 1.3. Warm-Up In this clip from the movie, Along Came Polly, what does Reuben (Ben Stiller) lose by putting on and taking off.](https://reader035.fdocuments.net/reader035/viewer/2022081520/5697c0011a28abf838cc2a30/html5/thumbnails/1.jpg)
Opportunity Cost
Chapter 1.3
![Page 2: Opportunity Cost Chapter 1.3. Warm-Up In this clip from the movie, Along Came Polly, what does Reuben (Ben Stiller) lose by putting on and taking off.](https://reader035.fdocuments.net/reader035/viewer/2022081520/5697c0011a28abf838cc2a30/html5/thumbnails/2.jpg)
Warm-Up
In this clip from the movie, Along Came Polly, what does Reuben (Ben Stiller) lose by putting on and taking off his pillows every morning and evening?
![Page 3: Opportunity Cost Chapter 1.3. Warm-Up In this clip from the movie, Along Came Polly, what does Reuben (Ben Stiller) lose by putting on and taking off.](https://reader035.fdocuments.net/reader035/viewer/2022081520/5697c0011a28abf838cc2a30/html5/thumbnails/3.jpg)
Reading Quiz 1.3
1. Define Opportunity Cost
2. True or False: opportunity cost varies
3. What is sunk cost?
4. List one opportunity cost of going to college.
![Page 4: Opportunity Cost Chapter 1.3. Warm-Up In this clip from the movie, Along Came Polly, what does Reuben (Ben Stiller) lose by putting on and taking off.](https://reader035.fdocuments.net/reader035/viewer/2022081520/5697c0011a28abf838cc2a30/html5/thumbnails/4.jpg)
OPPORTUNITY COSTCLASS NOTES (RIGHT)
![Page 5: Opportunity Cost Chapter 1.3. Warm-Up In this clip from the movie, Along Came Polly, what does Reuben (Ben Stiller) lose by putting on and taking off.](https://reader035.fdocuments.net/reader035/viewer/2022081520/5697c0011a28abf838cc2a30/html5/thumbnails/5.jpg)
Opportunity Cost
• The Opportunity Cost of the chosen item or activity is the value of the best alternative you must pass up.
• We ALWAYS choose what we do or buy because it is the most preferable at the time.
• Simulation
![Page 6: Opportunity Cost Chapter 1.3. Warm-Up In this clip from the movie, Along Came Polly, what does Reuben (Ben Stiller) lose by putting on and taking off.](https://reader035.fdocuments.net/reader035/viewer/2022081520/5697c0011a28abf838cc2a30/html5/thumbnails/6.jpg)
Estimate Opportunity Cost
Opportunity cost is an estimate: we never really know the real value of next best alternative, only what is expected.
![Page 7: Opportunity Cost Chapter 1.3. Warm-Up In this clip from the movie, Along Came Polly, what does Reuben (Ben Stiller) lose by putting on and taking off.](https://reader035.fdocuments.net/reader035/viewer/2022081520/5697c0011a28abf838cc2a30/html5/thumbnails/7.jpg)
Opportunity Cost Varies
Opportunity cost depends on the value of the alternatives!
![Page 8: Opportunity Cost Chapter 1.3. Warm-Up In this clip from the movie, Along Came Polly, what does Reuben (Ben Stiller) lose by putting on and taking off.](https://reader035.fdocuments.net/reader035/viewer/2022081520/5697c0011a28abf838cc2a30/html5/thumbnails/8.jpg)
Do we REALLY calculate O.C.?
We estimate the opportunity cost based on rational self-interest. We don’t necessarily calculate value of all possible alternatives. Information may be limited/faulty
Decisions may lead to lost opportunities and regret
![Page 9: Opportunity Cost Chapter 1.3. Warm-Up In this clip from the movie, Along Came Polly, what does Reuben (Ben Stiller) lose by putting on and taking off.](https://reader035.fdocuments.net/reader035/viewer/2022081520/5697c0011a28abf838cc2a30/html5/thumbnails/9.jpg)
Time = Scarce
OR
![Page 10: Opportunity Cost Chapter 1.3. Warm-Up In this clip from the movie, Along Came Polly, what does Reuben (Ben Stiller) lose by putting on and taking off.](https://reader035.fdocuments.net/reader035/viewer/2022081520/5697c0011a28abf838cc2a30/html5/thumbnails/10.jpg)
Sunk Cost
Sunk Cost: a PAST cost that you have already acquired and cannot recover
Sunk costs must be ignored when making economic decisions
“No point in crying over spilled milk”