Question

Joe sold gold coins for $1,000 that he bought a year ago for $1,000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money because he could have received a 3% percent return on the $1,000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of:

a. opportunity costs
b. marginal benefits that exceed marginal costs
c. imperfect information
d. normative economics

Answer 1

The correct answer is a. opportunity costs

Step-by-step explanation:

The cost of opportunity is the best alternative that you sacrifice when you choose an option.

It represent the benefits that you misses out on when choosing one alternative over another.

In this case the best alternative you misses out, was buy a bank certificate of deposit, and at the end of the year would have had $1030.