Econ--opportunity cost

2007-09-17 1:54 am

'Dad, please give me $5000 to buy reference books,' asked John.
'Here you are.But you must not spend it on other things,' said Dad.

a)What is the cost
i)to John's father of giving John the $500?
ii)to John of using the $500? (6marks)
b) Suppose John bought a reference book which he later finds to be useless. Has his cost of buying the reference book increased? Explain your answer. (4marks)

回答 (1)

barbara

2007-09-17 2:28 am

✔ 最佳答案

Before answering this question, you should know what is cost in Economics.
In Economics, opportunity cost means the highest value alternative forgone.

so

a. i) The cost is the thing(s) that John's father wants to buy if not giving John this sum of money, if John's father have no other uses of this $5000, then there is no cost (as there is no second alternative to give up) to him.

a. ii) Since John's father ordered John not to spend on other things, so no cost to him. (assuming that John obeyed his father)

b. No, since he can't spend the money on other things as ordered by his father. Whether the book is useless or not, is out of question in terms of cost. Since cost here refers to highest value alternative forgone, with no alternative here, so no change in the the cost.

參考: Me

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