Chapter 1 Lesson 3 Opportunity Cost and Choice

Sunk Cost

A cost you have already paid and cannot recover, regardless of what you do now.

Why should consumers ignore costs they have already paid when making decisions?

Costs that have been already incurred should not be taken into account while making economic decisions. This is due to the costs incurred before are sunk costs and have already been incurred and can't be retracted. Only new costs to be incurred should be taken into account.

Why must there be an opportunity cost for every choice you make?

If it is a choice, then you are deciding between two or more options. The opportunity cost of whatever you decide means you have chosen the best option, with the next best option foregone.

Why isn't the opportunity cost of using your time to do homework always the same?

Opportunity cost varies with time. At different points of time, one may have different opportunity cost based on the best alternate thing available for them to do at that particular instant. Hence, the opportunity cost of doing homework is not always the same.

What is the greatest cost of attending college at in-state public institutions?

The greatest cost of attending collage at in-state public institutions is $21,000 per year for students which includes food, board, personal expenses, tuition, fees and books.

Opportunity Cost

The value of the best alternative passed up for the chosen item or activity.

What factor forces even people who are very wealthy to face opportunity costs?

Time is the ultimate factor that forces even the richest people to face opportunity costs as the time available is limited to enjoy different goods and services.