Economics: Can opportunity cost be zero?

[opticalmace]

Originally posted by: Mwilding
Anyone believe this knowledge is valuable in the real world?

It's useful so far as it's a way of thinking about things.
Which doesn't say much.

 

[Krugger]

everyone who says opportunity cost can NEVER be zero is wrong from a pure econ frame of reference. in real world or whatever, sure. but from the economic definition and application there are examples where it can be zero. situations involving sunk costs, no subsititute available, excess capacity/production... etc all can lead to this. don't feel like gettin more complicated though.
as for this specific example, i'd have to see it if there's more to it.
talking ppfs, the easiest way to see how this COULD be true is this:

apples
...5|x
...4|...x
...3|......x
...2|...y....x
...1|............x
.....----------------
.......1 2 3 4 5 bananas

suppose the x's are the ppf curve. y is the current state: at 2a's and 2 b's. efficient allocation results in a shift from y to x above it, at 4a's and 2b's. Here, as was stated, nothing produced before has decreased and only positive things have happened. there is NO opportunity cost here, as we have the same amount of bananas and 2 additional apples.

it's late so i may have made a mistake, but i tried.
<----Econ major

 

[Krugger]

^ look ma, i learned something in college!

 

[UncleWai]

That just means you are maximizing your output.
The opportunity cost of getting one banana is one apple, vice versa.

 

[Krugger]

Originally posted by: UncleWai
That just means you are maximizing your output.
The opportunity cost of getting one banana is one apple, vice versa.

and the opp cost of maxing output and moving from 2,2 to 2,4 is zero... which was the question.

 

[dolph]

lol, the op is in my class! and i haven't done the homework for it yet, either

 

[dfi]

Originally posted by: Krugger

Originally posted by: UncleWai
That just means you are maximizing your output.
The opportunity cost of getting one banana is one apple, vice versa.

and the opp cost of maxing output and moving from 2,2 to 2,4 is zero... which was the question.

Let's see if this makes sense. Opp cost of making 2 apples and 2 bananas is what you would've lost in apples or bananas if you were to specialize. Even if you have maximized efficiency to produce 2,4, the opp cost is still what you could've gotten from specialization. So if you have increased your efficiency to produce 4 bananas instead of 2, then your opp cost of moving from 2,2 to 2,4 is at least an increased opp cost of bananas production from specialization.

Hopefully that makes some sense.

dfi

 

[gunblade]

Originally posted by: Krugger
everyone who says opportunity cost can NEVER be zero is wrong from a pure econ frame of reference. in real world or whatever, sure. but from the economic definition and application there are examples where it can be zero. situations involving sunk costs, no subsititute available, excess capacity/production... etc all can lead to this. don't feel like gettin more complicated though.
as for this specific example, i'd have to see it if there's more to it.
talking ppfs, the easiest way to see how this COULD be true is this:

apples
...5|x
...4|...x
...3|......x
...2|...y....x
...1|............x
.....----------------
.......1 2 3 4 5 bananas

suppose the x's are the ppf curve. y is the current state: at 2a's and 2 b's. efficient allocation results in a shift from y to x above it, at 4a's and 2b's. Here, as was stated, nothing produced before has decreased and only positive things have happened. there is NO opportunity cost here, as we have the same amount of bananas and 2 additional apples.

it's late so i may have made a mistake, but i tried.
<----Econ major

No increment in oppotunity cost does not equal to zero opportunity cost.

The opportunity cost is the same.

The improvement in efficiency just make better use of the resources, but the resources use is the same and can be make use in other way. (opp cost)

 

[Krugger]

well you guys obviously disagree with me, maybe you'll agree with the professor then? The OP did put zero for the answer and got it correct. that should be the end of the story. why no one wants to believe i'm right is surprising. i do know what i'm talking about however. this is my major.

Originally posted by: dfi

Let's see if this makes sense. Opp cost of making 2 apples and 2 bananas is what you would've lost in apples or bananas if you were to specialize. Even if you have maximized efficiency to produce 2,4, the opp cost is still what you could've gotten from specialization. So if you have increased your efficiency to produce 4 bananas instead of 2, then your opp cost of moving from 2,2 to 2,4 is at least an increased opp cost of bananas production from specialization.

Hopefully that makes some sense.

dfi

no, it's not. if i went from 2,4 on the ppf to 3,3 on the ppf, the opp cost of that move would be 1 apple. it'd be the # of apples i lose for that 1 banana. it would NOT be the amount of apples i could've had if i had specialized. that's not how it works here.

 

[dfi]

Originally posted by: Krugger
well you guys obviously disagree with me, maybe you'll agree with the professor then? The OP did put zero for the answer and got it correct. that should be the end of the story. why no one wants to believe i'm right is surprising. i do know what i'm talking about however. this is my major.

Originally posted by: dfi

Let's see if this makes sense. Opp cost of making 2 apples and 2 bananas is what you would've lost in apples or bananas if you were to specialize. Even if you have maximized efficiency to produce 2,4, the opp cost is still what you could've gotten from specialization. So if you have increased your efficiency to produce 4 bananas instead of 2, then your opp cost of moving from 2,2 to 2,4 is at least an increased opp cost of bananas production from specialization.

Hopefully that makes some sense.

dfi

no, it's not. if i went from 2,4 on the ppf to 3,3 on the ppf, the opp cost of that move would be 1 apple. it'd be the # of apples i lose for that 1 banana. it would NOT be the amount of apples i could've had if i had specialized. that's not how it works here.

Well, I don't think there's any point in pulling the "this is my major so I must be right" card since I'm sure many here are econ majors. I was an econ major, but I could easily be wrong since it's been quite a while since I've had to do any econ work.

I think in that specific question of moving from one inefficient point inside the ppf onto the ppf, the opp cost of moving from one point to another is 0. However, it seems that myself and others are trying to stress that, just because moving from an inefficient point to an efficient point has 0 opp cost, doesn't mean that producing at this efficient point on the ppf has no opp cost.

dfi