[Economics HW] Here are three things you could do if you do not attend your next-door neighbor's barbecue:

Question

Hi!

please help me out with this problem.

Here are three things you could do if you do not attend your next-door neighbor's barbecue: watch television with some friends (you value this at $8), read a good novel (you value this at $4), or go in to work (you could earn $6 during the barbecue). The opportunity cost of going to your neighbor's barbecue is

A. $6, because this is the only alternative of the three where you actually receive a monetary payment.

B. $4, because this is the lowest valued alternative forfeited.

C. $8, because this is the highest valued alternative forfeited.

D. $18, because this is the total dollar sum of the alternatives forfeited.

the 2 alternatives throw me off..

do you have to take the average, or combine, or pick one?

thanks for you help!

Answer 1

I was going to say (A), but then again, I have to go with Coach, the teacher.

Answer 2

The answer is "C" because that is your highest opportunity cost that you will give up to goto the bar-B-Q

I am certain of this and can prove it by the "Superbowl" analogy:

You have a ticket to the Superbowl and you got the ticket FOR FREE from the radio station. I walk up to you and offer you $500 dollars for the ticket and another man gives you the highest offer of $800 dollars.

The two opportunity costs you give up in actually USING the ticket is that you give up ability to get A.) $500 dollars or B.) $800 dollars

With $800 being the highest offer tendered, then you would have an opportunity cost of FOREGOING the $800 dollars should you choose to goto the game.

Hope this helps!

-Jerry, University of South Florida, Economics Major

Answer 3

Hello.. It would be watch television because it is the alternative you value the most... All of the choices are trade-offs, but only ONE alternative can by your opportunity cost.. well at least on value..! Hope this helps!

Edit**

Bonnie: That is a very common assumption! One of the first things I tell my students is that in Econ the "cost" of something is not always a "monetary" cost!  It takes awhile to get used to that way of thinking!