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 his pillows every morning and evening?. Reading Quiz 1.3. Define Opportunity Cost True or False: opportunity cost varies
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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?
Opportunity cost is an estimate: we never really know the real value of next best alternative, only what is expected.
Opportunity cost depends on the value of the alternatives!
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
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”