Gasoline, insurance, depreciation, and repairs are all costs of owning a car. Wh
ID: 2505570 • Letter: G
Question
Gasoline, insurance, depreciation, and repairs are all costs of owning a car. Which of these can be considered opportunity costs in the context of each of the following decisions?
a. You own a car and are deciding whether to drive 100 miles for a weekend visit to a friend at another university.
b. You do not own a car but are considering buying one so that you can get a part-time job located 5 miles from where you live.
In general, why does the context in which you decide to do something affect the opportunity cost of doing it?
Gasoline, insurance, depreciation, and repairs are all costs of owning a car. Which of these can be considered opportunity costs in the context of each of the following decisions? You own a car and are deciding whether to drive 100 miles for a weekend visit to a friend at another university. You do not own a car but are considering buying one so that you can get a part-time job located 5 miles from where you live. In general, why does the context in which you decide to do something affect the opportunity cost of doing it?Explanation / Answer
The opportunity cost of any decision can be viewed as "the cost of what you give up" in order to carry through with your respective selection.
A) The opportunity cost of driving to see the friend can be viewed as the the added appreciation to your vehicle for driving it 10 miles, the gas cost of doing so, etc. The opportunity cost of choosing to not put the stress on your car for the 100 mile trip would be the friendship itself.
B) Not buying a car would result in the opportunity cost of not getting the desired job. Purchasing the car would result in the opportunity cost of whatever else you could have used that money for.
We face these continual "costs" because of ever-present scarcity in the world in which we live. That is, you can't have your cake and eat it too.
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