Discussion
Opportunity Costs
Assume that you are the manager of a company that experiences a 50% increase in market demand for its product during the summer months (June through August). One option for meeting this increased demand is to require existing company employees to work overtime for 20 hours per week. A second option is to hire seasonal workers to meet the demand, and the third option is to subcontract the extra production to a competitor.
250- to 300-word statement that addresses the following:
• What are the likely opportunity costs associated with each option? Explain your rationale.
• Based on the principle of increasing opportunity costs, which of the two options would you select and why?
• Why do you think this option will reduce the opportunity costs more than the other options?
Read a selection of your colleagues' postings.
Respond by Day 6 to two or more of your colleagues' postings in one or more of the following ways:
• Ask a probing question.
• Share an insight from having read your colleague's posting.
• Offer and support an opinion.
• Make a suggestion.
• Expand on your colleague's posting.
Return to this Discussion in a few days to read the responses to your initial posting. Note what you learned and the insights you gained as a result of the comments your colleagues made.
Be sure to support your work with specific citations from the Learning Resources and any additional sources.
Required Resources
Readings
• Frank, R. H., & Bernanke, B. S. (2010). Principles of microeconomics, brief edition (2nd ed.). New York, NY:McGraw-Hill/Irwin.
"Comparative Advantage" (pp. 35-59)
introduces the concept of comparative advantage. The chapter describes the production possibilities curve and the production possibilities model to illustrate how specialization enhances the productive capacity of an economy.
Focus on the principle of comparative advantage, along with the given examples. In addition, concentrate on the production possibility curve and how it is affected by individual productivity.
Media
• Kahn Academy. (2014c). Comparative advantage specialization and gains from trade [Video file]. Retrieved from https://www.khanacademy.org/economics-finance-domain/microeconomics/choices-opp-cost-tutorial/gains-from-trade-tutorial/v/comparative-advantage-specialization-and-gains-from-trade
• Optional Resources
o Frank, R. H., & Bernanke, B. S. (2011). Principles of microeconomics, brief edition (2nd ed.) [Supplemental material]. Retrieved from https://highered.mheducation.com/sites/0077316770/student_view0/index.html
• Kahn Academy. (2014b). Comparative advantage and absolute advantage [Video file]. Retrieved from https://www.khanacademy.org/economics-finance-domain/microeconomics/choices-opp-cost-tutorial/gains-from-trade-tutorial/v/comparative-advantage-and-absolute-advantage