--%>
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 : Comparative Advantage of free trade

    According to the advocates of free trade and World Trade Organization, each and every country potentially advantages from trade liberalization and the lowering of tariffs since each and every country: (1) Has a comparative benefit in something. (2) Ga

    		•
  • Q : Market efficiency while transaction

    Transaction costs tend to be decreased and markets are more efficient when: (w) the government subsidizes a good. (x) inter-market price differentials are eliminated through arbitrage. (y) taxes are used to give for social wants. (z) regulations close

    		•
  • Q : Demand often exceeds supply and supply

    “In the corn market, demand often exceeds supply and supply sometimes exceeds demand.” “The price of corn rises and falls in response to changes in supply and demand.” Among these 2 statements used correctly which in the terms “supply&rdq

    		•
  • Q : Conception of the Invisible Hand by

    Conception of the “Invisible Hand” by Adam Smith relies on mechanisms like those as underpin: (1) William Stanley Jevons’ “sunspot” theory of business cycles. (2) the biological concept of Homeostasis. (3

    		•
  • Q : Determine the productively efficiency

    To be productively efficient, a country should: (w) maximize the satisfaction attainable from its budget. (x) be concerned only with macroeconomic analysis. (y) concentrate on removing scarcity. (z) maximize the value of output produced through specif

    		•
  • Q : Define the term invisible hand in

    The “invisible hand” of the marketplace is a word referring to consider as: (w) government policies to set market prices at equilibrium levels. (x) speculative manipulations which create disequilibrium. (y) automatic adjus

    		•
  • Q : Define Average cost and Marginal cost

    Briefly explain the term Average cost and Marginal cost?

    		•
  • Q : Define the Legal forms of businesses

    Define the Legal forms of businesses?

    		•
  • Q : Demand for bagels rises dramatically

    Explain the demand for bagels rises dramatically while the demand for breakfast cereal falls?

    		•
  • Q : The federal fiscal stimulus Question:

    Question: Was the stimulus package passed in 2009 as success?  In answering this question the focus should be the articles on the syllabus, but you should also include opinions of other commentators.   Your answer should also describe w

    		•