ECO100Y1 Lecture Notes - Opportunity Cost, Sunk Costs, Marginal Cost
Document Summary
Opportunity cost continued: benefit of attending university for one year. C: ,000: if opportunity cost increases from %15,000 (sept. 2012) to. ,000(sept. 2013), individual will choose not to attend university. Observations: opportunity cost is the same for a,b, and c, because of individuals like c, enrollment declined in sept. 2013. Direct costs (each dollar spent has opportunity cost of one dollar. Undertake activity if marginal (additional) benefit exceeds marginal (additional) cost. Insights: include all opportunity costs, ignore sunk costs. Costs which are incurred whether or not action is taken. Only relevant costs are those which can be avoided if action is not taken: marginal benefit of attending sports event: (both jack and jill: ticket price: Mb = 100 mc = 75 + 50 = 125. Mb
