Question

9. Opportunity costs can be: • Explicit, if they are out of pocket expenses (in cash or in kind). • Implicit, if they are not a disbursement, but they arise as a result of the value of your time or any other alternative us that you may have made out of the resource. For example, the cost from taking time off from work to go to the dentist are an implicit cost Gary has his own business driving clients to airports in a limousine that he owns. Which of the following is an example of an explicit cost in his business? A. Purchase of gasoline. B. Tolls and parking fees. C. Car insurance. D. All of the above 10. Gary has his own business driving clients to airports in a limousine that he owns. Which of the following is an example of an opportunity cost in his business? A. Purchase of gasoline. B. Tolls and parking fees. C. The interest he could have earned if the money spent on the limousine was in a bank account instead. D. Car insurance. E. All of the above. 11. The marginal principle implies that an individual will do best by producing or consuming where A. Marginal benefits are less than marginal costs. B. Marginal benefits are more than marginal costs. C. Marginal benefits equal marginal costs. D. Marginal benefits equal sunk costs. 12. Suppose you own a house. What is the opportunity cost of living in the house? A. There is no opportunity cost because you own the house. B. There is no opportunity cost unless you could set up a business in the house. C. The opportunity cost is the rent you could have received from a tenant if you did not live there. D. The opportunity cost is the cost of your monthly mortgage payment plus bills.

Answer 1