Question

economics final exam study guide
\blessed are the young for they shall inherit the national debt\
--herbert hoover

1. what is an opportunity cost? give an example of a situation where you faced an opportunity cost.

Explanation:

Opportunity cost is a key concept in Economics (a subfield of Business). It refers to the value of the next - best alternative that is forgone when a choice is made. For example, if a student has two hours in the evening and can either study for an exam (which would likely lead to better grades) or watch a movie (which provides entertainment), if the student chooses to watch the movie, the opportunity cost is the potential improvement in grades from studying. In a personal situation, suppose you have $50 and you can either buy a new book (which would give you knowledge and reading pleasure) or a new video game (which would give you gaming entertainment). If you choose to buy the video game, the opportunity cost is the enjoyment and knowledge you would have gained from the book.

Answer:

Opportunity cost is the value of the next - best alternative forgone when a decision is made. For example, choosing to spend $50 on a video game (instead of a book) means the opportunity cost is the benefits (knowledge, reading pleasure) from the book.