Question

If you receive $200 from your family as a graduation gift and decide to keep it in your wallet instead of depositing it into your savings account earning 2%, what is your opportunity cost?
A) The opportunity cost would be $4.
B) The opportunity cost would be $40.
C) The opportunity cost would be $20.
D) The opportunity cost would be $200.

Answer 1

Answer:

The answer is A) The opportunity cost would be $4.

Explanation:

Answer 2

The opportunity cost would be $4. Thus, option A is correct.

What is an opportunity cost?

The idea of opportunity cost enables us to select the greatest alternative out of all those that are available. It enables us to make the most effective use of all available resources, maximizing economic gains. Explicit opportunity costs and implicit opportunity costs are the two main categories of opportunity costs.

You have received a sum of $200 from your family as a graduation gift now if you had decided to put it in a  savings account than your earnings would be in that amount of 2%.

That means that with $200 you would have received a sum of $4. Now, the opportunity cost will be considered as $4.  But this cost will be negative as money is not deposited. Therefore, option A is the correct option.

Learn more about opportunity costs, here:

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