Question

Your three alternatives to attending class on Thursday

evenings are hanging out with friends (which you value at $25), driving for door dash (where you would earn $20), or reading a book for leisure (which you value at $15). The opportunity cost of attending class is:

A. $25, because this is the highest valued alternative vou forfeit.
B. $15, because this is the lowest valued alternative you forfeit.
C. $20, because door dashing is the only alternative where you would actually receive payment.

Answer 1

The opportunity cost of attending class on Thursday evening is $25, since it is the value of the most highly valued alternative forfeited, which is hanging out with friends.

Step-by-step explanation:

The opportunity cost of attending class on Thursday evenings, given your alternatives of hanging out with friends, driving for DoorDash, or reading a book for leisure, is determined by the value of the next best alternative you forgo to attend the class. If hanging out with friends is valued at $25, driving for DoorDash would earn you $20, and reading a book is valued at $15, then the opportunity cost is the highest valued alternative you are not choosing.

Therefore, the correct answer is: A. $25, because this is the highest valued alternative you forfeit when you decide to attend class instead. This concept is crucial as it can sometimes alter behavior once individuals realize what they are giving up.

For example, considering the annual sum of daily opportunities costs of buying lunch at work instead of bringing a lunch from home could lead to different spending habits once you equate it to something larger, like a vacation. Similarly, attending college has not only the out-of-pocket costs but also the opportunity cost of lost earnings during the hours spent in class and studying.