Tradeoffs And Opportunity Costs

Many current controversies illustrate the tradeoffs and opportunity costs indicated in movements along a particular production possibilities curve. (Any two categories of "output" can be placed on the axes of production possibilities curves.) Should scenic land be used for logging and mining or preserved as wilderness? If the land is used for logging and mining, the opportunity cost is the forgone benefits of wilderness. If the land is used for wilderness, the opportunity cost is the lost value of the wood and minerals that society forgoes.

Should society devote more resources to the criminal justice system (police, courts, and prisons) or to education (teachers, books, and schools)? If society devotes more resources to the criminal justice system, other things equal, the opportunity cost is forgone improvements in education. If more resources are allocated to education, the opportunity cost is the forgone benefits from an improved criminal justice system.

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