Chapter 3: Show Me the Money (The Law of Supply)
3.1- Explain why marginal costs are ultimately opportunity costs
3.2- Define sunk costs and explain why they do no influence smart, forward-looking
3.3-Decreibe the relationship between price and quantity supplied, and identify the
roles of higher profits and marginal opportunity costs of production.
3.4- Explain the difference between a change in quantity supplied and a change in
supply, and list all five factors that change supply.
3.5- Explain Elasticity of supply and how it helps businesses avoid disappointed
3.1 What does it really cost? Costs are Opportunity Costs
1. What is the real cost to a business of hiring or purchasing any input?
2. Microsoft released a limited supply of Xbox 360’s in 2005 with a list price—
or “real” price of--$400. The unit’s immediately started selling on eBay and
other online auction websites for far more than $400. What do you think
determined the “real” price of an Xbox?
3. If a recession makes it much harder for workers to find better-paying jobs,
what might happen to Paola’s labor costs?
3.2 Forget it, it’s History: Sunk Costs Don’t matter For Future Choices
1. What aren’t sunk costs part of opportunity costs of forward-looking
2. Suppose you have just paid your bus fare. A friend in a car pull up and offers
you a ride. Explain how you would decide between staying on the bus or
taking the ride, and the influence of the paid fare.
3. If you bought a $100 for a coarse, and then dropped out after the tuition
refund date, is that $100 a sunk cost? Explain your answer.
3.3 More for More Money: The Law of Supply
1. What does Paola need a higher price to be willi