Question

Danielle is planning a cruise to Mexico and has a budget for new clothes of $300. The average price for a pair of shoes is $50 while the average price for a suit is $100. Danielle already has 4 pair of shoes purchased for her cruise, what is the opportunity cost of buying two more pairs of shoes?

a) 1 dress

b) 1 pair of shoes

c) 2 dresses

Answer 1

Option A.

• We know that the opportunity cost refers to the benefit forgone from selecting one alternative over the other.
• Given that Danielle has a budget for new clothes of $300, average price for a pair of shoes = $50 and the average price of a suit = $100.
• It is given that Danielle already has 4 pair of shoes that he has purchased for her cruise.
• Hence his expenditure on shoes =4 X $ 50 = $200.
• If she is planning to buy two more pairs of shoes then her additional expenditure = $50 × 2 =$ 100. Which completes her total budget.
• The $ 100 obtained is equal to the price of one dress.
• If she wants to purchase additional shoes then she has to give up purchasing one dress.
• Hence the opportunity cost of buying two more pairs of shoes equals 1 dress.