Question

Here are three things you could do if you do not attend your neighbor's barbecue: watch television with some friends (you value this at $17), read a good novel (you value this at $14), or go in to work (you could earn $16 during the barbecue). The opportunity cost of going to your neighbor's barbecue is

a. $16, because this is the only alternative of the three where you actually receive a monetary payment.
b. $14, because this is the lowest valued alternative forfeited.
c. $17, because this is the highest valued alternative forfeited.
d. $47, because this is the total dollar sum of the alternatives forfeited.

Answer 1

Answer: Option (c) is correct.

Explanation:

Given that,

Alternatives for a person if he do not attend his neighbor's barbecue:

(1) Watch television with some friends = he value this at $17

(2) Read a good novel = he value this at $14

(3) Go in to work = he could earn $16 during the barbecue

Opportunity cost is the benefit that is foregone for an individual by choosing one alternative over other alternatives available to him.

If the opportunity cost is lower for an individual then this will benefit him whereas if the opportunity cost is higher then this will not benefit the individuals.

Therefore, the opportunity cost of going to his neighbor's barbecue is the enjoyment he get from watching television with some friends because this is the highest valued alternative forfeited.