Question

If a new home can be constructed for $150,000, what is the opportunity cost of federal defense spending, measured in terms of private housing? (assume a defense budget of $700 billion.) instructions: enter your response rounded to one decimal place. 4666666.7 million homes

Answer 1

The opportunity cost of defense budget in terms of private housing is $4666666.7 homes.

Opportunity cost is the cost of next best alternative foregone.

Formula to calculate the opportunity cost for defense budget in terms of private housing is:

= total defense spending/cost of a new home

= $700,000,000,000/$150,000.

In other words, we can say that we have to give up $4666666.7 homes when we are spending an amount of $700 billion on federal defense.