Question

1)

Lisa is choosing between three alternatives: a) talking to her grandmother which she values at 30 dollars; b) writing a term paper which she values at 40 dollars; or c) going out with a friend, which she values at 50 dollars. The opportunity cost of writing the term paper is:???

Please explain your reasoning for your answer to the previous question.

2)

Instead of attending class, one could have worked an extra hour at the café for $10 or watched a neighbor’s child for $15. The opportunity cost of attending class is:

Please explain your reasoning for your answer to the previous question.

Answer 1

The opportunity cost is the cost of next best alternative. That is the cost of the option which has been forgone by the person.

1.

In the 1st question Lisa has three alternatives, if Lisa choses to write term paper, and she considers taking grandmother vas the next best alternative, then the opportunity cost of writing paper is $30. If Lisa choses to write term paper, and she considers taking going out with friends as the next best alternative, then the opportunity cost of writing paper is $50.

2. The opportunity cost of attending class is $10 if the next best altyernative is considered to be working for an extra hour at cafe. It will be $15 if next best alternative is considered as keeping a watch on neighbor's child