Question

Consider the winter activity of skiing. Assume that the rental cost of ski equipment is $100 and the lift ticket costs $75. If you go skiing, you would wear the ski jacket you purchased last year for $125. If you do not go skiing, you could either work at your part-time job, which would earn you $100, or study at the library, which you value at $60. Suppose you were planning to spend the day at work. What is included in the opportunity cost of going skiing in this case? Enter Y if the item is included or N if it is not.

The rental cost of ski equipment

The cost of the lift ticket

The value of your time spent studying

The cost of the ski jacket you purchased last year

The wages you forgo by going skiing

Answer 1

Opportunity cost of an action is the value of the best alternative that we forgo , or give up, when we make a choice/decision/action.

Explicit cost - They represent any costs involved in payment of cash or other tangible resources

Implicit cost - They represent the costs as a value of the best alternative given up

The rental cost of ski equipment N  - It is an explicit cost

The cost of the lift ticket   N - It is an explicit cost

The value of your time spent studying   Y - It is an implicit cost

The cost of the ski jacket you purchased last year N - It is an explicit cost

The wages you forgo by going skiing Y - It is an implicit cost