Question

If I can change the oil in my car in less than the time that a professional at the carshop does, should I change the oil in my car? Use the concept of opportunity cost, comparative advantage and trade to answer.

Answer 1

Opportunity cost (OC) is the benefit foregone by choosing one alternative over another. If I myself change the oil in my car, I have to compute the benefit I had to forego by giving the time for changing oil instead of spending that time to the second-best alternative work. If the earning (benefit) I had to forego is lower than the money I would need to pay the car-shop professional, I would benefit by changing oil myself. But if the earning (benefit) I had to forego is higher than the money I would need to pay the car-shop professional, I would lose by changing oil myself, in which case it would be economically wiser to get it done by the car-shop professional.