Question

John chose to buy pizza. If he had not bought pizza, he would have bought either a hotdog or a burger. What is John's opportunity cost of buying the pizza?

1) The cost of the hotdog
2) The cost of the burger
3) The cost of the pizza
4) The cost of not buying the hotdog or the burger

Answer 1

The opportunity cost of buying pizza for John is the satisfaction or utility he would have experienced from the next best alternative, which could be either the hotdog or the burger.

Step-by-step explanation:

The student's question about John choosing to buy pizza touches on the concept of opportunity cost, which is crucial in Economics. The opportunity cost of buying the pizza is the value of the next best alternative that John forgoes, which, in this scenario, would be either the hotdog or the burger. If we apply Alphonso's dilemma, the cost of one item, say a burger, is not just the monetary value but also what must be sacrificed to make room within the budget—bus tickets in Alphonso's case.

In an economic context, if John decides to buy a pizza, his opportunity cost would be the satisfaction or utility he would have gained from consuming the hotdog or the burger—the items he did not choose. Thus, opportunity costs represent the benefits that a person misses out on when choosing one alternative over another.