ECONOMICS (CBSE/UGC NET)

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ECONOMICS

OPPORTUNITY COST

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Humphery Flobart is trying to decide whether to take a job as the manager at the local Wendy’s (making $25, 000/year) OR attend college. He cannot do both. For Humphery, the opportunity cost of attending college includes ____
A
The money he will spend on food whether or not he attends college.
B
The money he will spend on dates with his girlfriend, whether or not he attends college.
C
The $25, 000 Humphery could make managing the local Wendy’s next year if he didn’t go to college.
D
The cost that Humphery’s college, Boptown University, just paid to construct a new International Studies building.
Explanation: 

Detailed explanation-1: -Opportunity cost is calculated by applying the following formula: Opportunity Cost = Return on Most Profitable Investment Choice-Return on Investment Chosen to Pursue.

Detailed explanation-2: -How is Opportunity Cost Calculated? In financial analysis, the opportunity cost is factored into the present when calculating the Net Present Value formula. When presented with mutually exclusive options, the decision-making rule is to choose the project with the highest NPV.

Detailed explanation-3: -Ceteris paribus, or “all else equal, ” is a concept used by economists to make assumptions about the relationship between two specific variables-If they disregard all other possible economic variables.

Detailed explanation-4: -Opportunity cost refers to what you have to give up to buy what you want in terms of other goods or services.

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