# opportunity cost

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Thread starter 11 months ago
#1
can anyone explain why the answer is A
An individual has an appointment with his bank manager.
He has a choice between travelling to the appointment by car, or leaving the car at home and
travelling by bus and then by train. The costs of the journey are given below.
\$
bus fare 2
train fare 3
car parking charge 4
petrol 2
car wear and tear costs 1
Given this information, what is the opportunity cost to the individual of travelling by car rather than
by bus and train?
A \$2 B \$4 C \$7 D \$12
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Thread starter 11 months ago
#2
(Original post by IWMTom)
2.
Can you explain please
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11 months ago
#3
7 is 2 more than 5? unless there's some super special hidden details?
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11 months ago
#4
(Original post by nileiyen)
can anyone explain why the answer is A
An individual has an appointment with his bank manager.
He has a choice between travelling to the appointment by car, or leaving the car at home and
travelling by bus and then by train. The costs of the journey are given below.
\$
bus fare 2\$
train fare 3\$
car parking charge 4\$
petrol 2\$
car wear and tear costs 1\$
Given this information, what is the opportunity cost to the individual of travelling by car rather than
by bus and train?
A \$2 B \$4 C \$7 D \$12
You might be better off posting this in the alevel economics/business forum, op, but I took business so might be able to help

In business studies at least - an opportunity cost represents the benefits an individual or business misses out on when choosing one alternative over another. Not sure if that's relevant to you, but oh well.

The formula for opportunity Cost is FO−CO (FO being the return on the best foregone option, and CO being the return on your chosen option)

So in this case, the price of driving is 4+2+1\$, which equals 7\$ - this is our chosen option, or CO.

The alternate option we could have chosen was the bus and train, at 2+3\$, or \$5. This is our FO

So if we plug this into our formula: 5 - 7 = -2: Our opportunity cost was 2\$, or in other words, we could have saved 2\$ by taking the train and bus. If you're asked to write an essay on this, you could say that driving saves time, which allows you to get more done beforehand, time is money, it's more efficient etc.

*edit* OP is this for your AS exam?
Last edited by roo02; 11 months ago
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11 months ago
#5
(Original post by StriderHort)
7 is 2 more than 5? unless there's some super special hidden details?
That's legit it lol. The difference between one option and another. My post got deleted for some reason lmaooo
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Thread starter 11 months ago
#6
(Original post by roo02)
You might be better off posting this in the alevel economics/business forum, op, but I took business so might be able to help

In business studies at least - an opportunity cost represents the benefits an individual or business misses out on when choosing one alternative over another. Not sure if that's relevant to you, but oh well.

The formula for opportunity Cost is FO−CO (FO being the return on the best foregone option, and CO being the return on your chosen option)

So in this case, the price of driving is 4+2+1\$, which equals 7\$ - this is our chosen option, or CO.

The alternate option we could have chosen was the bus and train, at 2+3\$, or \$5. This is our FO

So if we plug this into our formula: 5 - 7 = -2: Our opportunity cost was 2\$, or in other words, we could have saved 2\$ by taking the train and bus. If you're asked to write an essay on this, you could say that driving saves time, which allows you to get more done beforehand, time is money, it's more efficient etc.

*edit* OP is this for your AS exam?
Thanks for replying
Yeah it’s for my A level exam
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Thread starter 11 months ago
#7
I do economics and not business
So this formula is of great help.
Thanks again
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11 months ago
#8
(Original post by nileiyen)
I do economics and not business
So this formula is of great help.
Thanks again
No probs, good luck!
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