Vecon Lab Opportunity Costs: Introduction

Each participant plays the role of a firm that must make decisions about inputs to be used in production. One input determines variable costs. In addition, a regulation requires a permit for each unit of output produced (e.g. an emissions allowance). These permits may be distributed as an endowment that can be used, bought, or sold. Using this input incurs an opportunity cost, even if the input is not purchased. Learning can be enhanced when relative earnings are provided after some rounds, and the data graph allows a comparision of supply functions for the person who earned the most with the supply functions for the person who learned the least.

Key Concepts:
Opportunity Cost
Supply (Short Run)
Economic Profit
Accounting Profit
Copyright 2009, Charles Holt, Please report problems and suggestions: veconlab@gmail.com

Vecon Lab - April 21, 2019