Question

Billy's job is 5 miles away. He can either ride the bus for $3.00 a day or drive his very old

car. Analyze the opportunity cost for Billy and society if Billy chooses to drive his car.

Answer 1

Personal Opportunity Cost - Spare non drive time sacrifised

Social Opportunity Cost - Fuel efficiency (high pollution), Road Traffic (Congestion issues).

Step-by-step explanation:

Opportunity Cost is the cost of next best alternative, foregone while choosing an alternative. Bill can commute either by bus, or by self drive.

If Bill drives his car, opportunity cost for him is - the spare time sacrifised, that he could have used while car drive in some other activity (eg reading, listening music).

Opportunity Cost for society is - the fuel utilisation & road traffic management efficiency sacrifised, by using private instead of public transport. This leads to more pollution, more congestion on roads.