--%>
Assignment Help - homework help

What is the opportunity cost of your decision

Suppose you arrive at a store expecting to pay $100 for an item, but learn that a store two miles away is charging $50 for it.  Would you drive there and buy it?  How does your decision benefit you?  What is the opportunity cost of your decision?  Now suppose you arrive at a store expecting to pay $6000 for an item, but learn that it costs $5950 at the other store.  Do you make the same decision as before? Perhaps surprisingly, you should!  Explain why.

E

Expert

Verified

Driving to the other store to save $50 does involve some cost in terms of time and inconvenience.  However, for most of us the time it takes to drive two miles would be worth $50.  For example, if it takes about ten minutes extra time and a negligible amount of gasoline (unless your time is worth $300 an hour, or $50 per each ten-minute period), it would benefit you to drive to the other store.  While in the second case, $50 may seem like less compared to the $6000 total price, for you the $50 is still a $50 savings, exactly the same as in the first case.  Therefore, you should apply the same reasoning.  Is the $50 benefit from driving the extra two miles worth the cost?  The conclusion should be the same in both cases.

   Related Questions in Business Economics

  • Q : Explain of the law of demand Explain of

    Explain of the law of demand?

    		•
  • Q : Illustrate other than price many factors

    Illustrate other than price many factors determine the outcome?

    		•
  • Q : Describe the term-Only to be part with

    Describe the term: “Only to be part with it we want money”?

    		•
  • Q : Generalization and abstraction are

    Explain the statement: “Generalization and abstraction are nearly synonymous.”?

    		•
  • Q : What is the opportunity cost of your

    Suppose you arrive at a store expecting to pay $100 for an item, but learn that a store two miles away is charging $50 for it.  Would you drive there and buy it?  How does your decision benefit you?  What is the opportunity cost of your decision?  Now suppose you arrive at a s

    		•
  • Q : Explain the volume and pattern of U.S.

    Explain the volume and pattern of U.S. and World Trade?

    		•
  • Q : Innate psychological attributes of

    As illustrated by Adam Smith that there are two innate psychological attributes of humans. One is which people have a powerful wish to better their individual circumstances. The other is as human beings so we are: (1) more interested

    		•
  • Q : Explain about the Payments for using

    Payments for the use of land, capital and labor are respectively termed as: (w) rent, wages and profits. (x) rent, interest and wages. (y) dues, profits and depreciation. (z) fruit, profits and money.

    Q : U.S. exports create a demand for

    True or false? “U.S. exports create a demand for foreign currencies; foreign imports of U.S. goods generate supplies of foreign currencies.”  Explain.

    		•
  • Q : Problem on prisoners dilemma game Lets

    Lets assume an infinitely repeated prisoner’s dilemma game by two players. The resulting payoffs at each phase by the actions of two players are illustrated below in the table (payoffs are symbolized like (payoff for player 1, payoff for player 2)). Two players

    		•