Question

I need some help please

Answer 1

Answer:

D. All of the above.

Explanation:

These are the complete statements on which you must decide which are examples of ooportunity cost.

Which of these are examples of opportunity cost?

A. You skip buying new jeans and put the money in your college fund.

B.You deposit your entire paycheck in your investment account instead of cashing it and taking your buddies out to eat.

C. You bring your lunch to your part-time job instead of spending $8 on lunch.

You put the $8 in your savings account.

D. All of the above.

Solution

The opportunity cost is the benefit that you stop perceiving when you undertake an activity that produces other benefits: the activity that you carry out brings you a benefit, the cost of which is the benefit that you stop perceiving when you cannot carry out the other activity; that is what opportunity cost is.

Example A. You skip buying new jeans and put the money in your college fund.

When you put money in your college fund, the benefit is the accumulation of wealth that will later allow you to go to college and have the education that you want.

What is left? The new jeans.

Thus, the opportunity cost is the new jeans.

Hence, this is an example of opportunity cost.

Example B.You deposit your entire paycheck in your investment account instead of cashing it and taking your buddies out to eat.

The benefit is the accumulation of money in your investement account, which will enlarge your wealth.

What is left? Taking your buddies out to eat.

You're giving up taking your friends out for dinner, which would be a nice activity for you. So this is a cost: the opportunity cost of depositing your entire paycheck in your investment account.

Hence, this is an example of opportunity cost.

Example C. You bring your lunch to your part-time job instead of spending $8 on lunch. You put the $8 in your savings account.

What is your benefit: putting the $8 in your savings account, which will give you greater financial strength, peace of mind, and the ability to make mandatory payments or buy something else in the future.

What are you giving up?

The possibility to buy a lunch which could be tasty, nutritious, and healthy (or not).

Hence, the possibility to buy a lunch is your opportunity cost. Imagine this is a low cost for you, for instance if you do not like the lunch that you can buy with the $8, then it will be an easy decision because the benefit of bringing your own lunch is much greater than the opportunity cost.

As you see, this is also an example of the concept of opportunity cost.

Conclusion:

• All are examples of opportunity cost (option D.)