Question

Suppose that you are given a $100 budget at work that can be spent only on two items: staplers and pens. If staplers cost $10 each and pens cost $2.50 each, then the opportunity cost of purchasing one stapler is:________________.

Answer 1

Answer:

4 pens.

Explanation:

Opportunity cost refers to the forfeited benefits after picking choosing one option over another. It is represented by the value of the next best alternative. Opportunity costs arise because choices have to be made between different alternatives.

If the price of a stapler is $10, and the price of a pen is $2.50. The value of one stapler is equivalents to the value of 4 pens.  If a choice is being made between pen and stapler, the opportunity cost will be the value of the forfeited item. Should the stapler be picked, the opportunity cost will be four pens.