So I went through the Ricardian model that shows how agents' differences in opportunity costs of production give reasons for trade that results in gains all round, contrary to the US folklore of exchange as a battle between Smart and Stupid ( Read more... )

Recall that the opportunity cost of a selected good, service, or action is the value of the net-best alternative forgone for the last unit. So if you're choosing a combination of gym time and cigarettes to optimize your goal (whatever that is), and an hour at the gym costs $10 while a pack of cigarettes costs $6, the opportunity cost of your hour ( Read more... )