You have 40,000 frequent flier miles. You could exchange your miles for a round trip ticket to Bermuda over spring break. Does that mean your flight to Bermuda would be free? Explain your reasoning
What will be an ideal response?
It does not. You could use your miles for other travel and so there is an opportunity cost if you use your miles to fly to Bermuda. Suppose, for example, you are definitely going to fly to Chicago when the spring semester is over. You could use your 40,000 miles to fly to Chicago or you could purchase a ticket for $300 . In this case, the opportunity cost of using your miles to fly to Bermuda is the $300 you will have to spend for the airfare to Chicago.
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All mutually beneficial trades have taken place. This implies that
A) the production possibilities curve is bowed out. B) society is inside the production possibilities curve. C) economic efficiency prevails in the society. D) society is on the constant cost portion of its production possibilities curve.
Trade between nations A and B:
A. leaves the consumption possibilities of nation A unchanged. B. leaves the consumption possibilities of nation B unchanged. C. increases the consumption possibilities of both nations. D. increases the production possibilities of both nations.