--%>
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 : Perfect competition leads the economic

    The perfectly competitive market structure benefits consumers since: w) firms do not generate goods at the lowest possible price within the long run. x) firms are forced through competitive pressure to be as efficient as possible. y) firms add a much

    		•
  • Q : History of King Louis world of commerce

    Early in the 18th century, a leading industrialist responded to an advisor of King Louis IV of France, who asked how the crown could most excellent facilitate the world of commerce, along with “Laissez nous faire,” that im

    		•
  • Q : Calculate Equilibrium Quantity and Price

    1. The owner of a firm calculates that next year's profit will be $1,000. Each successive year profit will increase by 10% (i.e. year 2: $1100; year 3: $1210 and so on.) At the end of the 5th year the firm could be sold for $20,000. A) if the appropriate di

    		•
  • Q : Major players in international trade

    Who are the major players in international trade today?  Besides Japan, what other Asian nations play significant roles in international trade?

    		•
  • Q : Economic crisis situation in Europe

    Question: Describe the present economic crisis situation in Europe.   Why has it been so difficult for the Europeans to find a solution to this problem?   Comment on what implications the crisis may have for the rest of the world i

    		•
  • Q : Expansion of preschool programs for

    Use the circular flow model to confirm this assertion for an expansion of preschool programs for disadvantaged children?

    		•
  • Q : Barter - Efficiency and the Gains from

    Relative to other systems, economies in that people exchange goods or resources directly along with other people for other goods or resources without using money like a usual denominator rely relatively heavily upon: (i) barter. (ii) specialization. (

    		•
  • Q : Market structure and pricing decision

    Just need help to see if I am in the right direction if there any think wrong need help with it.

    		•
  • Q : Importance of Price Earnings Ratio

    Write down the importance of Price Earnings Ratio?

    		•
  • Q : Describe the Personal distribution of

    Describe the Personal distribution of income?

    		•