When asked in a television interview what he felt he was missing out on because

Question

When asked in a television interview what he felt he was missing out on because he spent most of his time training for the Olympics, the rower answered, “A normal social life.” He also revealed that he had given up a job that paid $20,000 per year in order to train full-time. He was fortunate to receive a grant from Sport Canada of $10,000 per year, but this was not enough to cover all of his expenses. His food and rent were $5,000 per year and training expenses (coach’s fee, equipment costs etc.) were $16,000 per year. a. What is the annual opportunity cost of “going for Gold” for this rower? b. What is the annual opportunity cost to Canada of training this rower? c. In general, what is the annual opportunity cost to Canada of sending this rower and other athletes to the Olympics? Please give an explain your answer in detail.

Explanation / Answer

a) The annual opportunity cost of “going for Gold" for rower:-

Annual Opportunity Cost = The value of next best alternative sacrificed.

Here, The annual opportunity cost of “going for Gold" for rower is $ 20000 that the rower could have earned as the next best alternative option i.e., in doing the job.

b) The annual opportunity cost to Canada of training this rower = 16000 + 5000 - 10000 = $ 11000

c) In general, The annual opportunity cost to Canada of sending this rower and other athletes to the Olympics is the Cost of foregone alternatives for rower and other athletes. In other words, Opportunity cost to Canada of sending this rower and other athletes to the Olympics is the value of next best alternative sacrificed / given up by these athletes in order to go for the Olympics.

For example, In the given question, The annual opportunity cost for rower is $ 20000 that the rower could have earned as the next best alternative option i.e., in doing the job instead of going for Olympics.

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