Second Class

Rizzo told a story about a room full of pistachios to explain opportunity cost. The idea of opportunity cost is that any time you are doing one thing, you cannot do another. So even though in a room with 1 pistachio and 1000000 pistachio shells might sound like an OK way to get a free pistachio, the time and effort put into getting that last nut could be used elsewhere. You lost the opportunity to do something else with that time that could be more beneficial to you. This is the same reasoning behind why we will never run out of oil. Eventually it will become too difficult to get out of the ground profitably when you could be doing something else to get energy more easily.