Question

Learning Objective 1.3 The Opportunity Cost Principle 3. It is a beautiful afternoon and you are considering taking a leisurely stroll through the park. There are several other activities you had considered doing instead. The value you would have received from each of the activities is provided in the table below. Alternative activities Value Streaming a movie $5 Taking a nap $8 Chatting with your best friend $13 Reading a new book $15 What is the opportunity cost to you of taking the stroll through the park?

Answer 1

Answer 3:

Opportunity cost is the cost of the next best alternative foregone.

In the given case, the opportunity cost of taking the stroll through the park is the cost of the next best alternative, i.e. reading a new book, i.e. $15.

Answer 7:

Given, price of the cup of coffee = $3

Quantity of coffee	Total benefits	Marginal benefit	Marginal benefit
	($)	Calculation	Amount ($)
1	8	0
2	14	(14-8)/(2-1)	6
3	18	(18-14)/(3-2)	4
4	20	(20-18)/(4-3)	2
5	21	(21-20)/(5-4)	1

Neal should consume coffee to such an extent that the marginal benefit derived from each additional cup of coffee is more than or equals the price of a cup of coffee, i.e. he should consume 3 cups of coffee each day.

Answer 9:

(a) We can use the principle of incentives to decide whether to vote or not in the next elections. We can estimate the benefits for the society and the business and the individual from voting to a particular contestant in the elections.

(b)   We can use the principle of opportunity cost to judge whether or not to watch the beautiful sunset from the back porch of your home. This helps us determine if the benefits derived from such an act is more than the opportunity cost of doing something else in the idle time.

(c) This can be analyzed and decided upon by comparing the costs that will be incurred and the benefits that will be derived from pursuing major in economics or philosophy. A cost benefit analysis can be conducted.

(d) The decision of whether to purchase a second vehicle or not depends on the additional benefits that will be derived from the second vehicle as compared to its costs. Also, the concept of scarcity of resources should be taken into consideration.