In this section we look. at costs from yet another angle. Remember that one of the cardinal tenets of economics is that resources are scarce. That means every time we choose to use a resource one way, we’ve given up the opportunity to utilize it another way. That’s easy to see in our own lives, where we must constantly decide what to do with our limited time and income. Should we go to a movie or study for next week’s test? Should we-travel to Mexico or buy a car? Should we get postgraduate or professional training or begin work right after CL age? In each of these cases, making a choice in effect costs us the opportunity to do something else.
The best alternative forgone is ca; ed the opportunity cost, which we met briefly in Chapter 1 and develop more thoroughly here. The immediate dollar cost of going to a movie instead of studying is the price of a ticket, but the opportunity cost also includes the possibility of getting a higher grade on the exam. The opportunity costs of a decision include all its consequences, whether they reflect monetary transactions or not . Decisions have opportunity costs because choosing one thing in a world or scarcity means giving up something else. The opportunity cost is the value of the most valuable good or service forgone. One important example of opportunity cost is the cost of going to college. If went to a public university in 1999, the total costs of tuition, books,
and travel averaged about $5000. Does this mean that was your opportunity cost of going to school?
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