Answer to Question #120768 in Macroeconomics for Rajvir Kaur

Question

What is an opportunity cost? How does the idea relate to the definition of economics? Which of the following decisions would entail the greatest opportunity cost? Example allocating a square block in the heart of the Toronto for surface parking lot or allocating a block at the edge of typical subrub for a lot? Explain.

Answer 1

Opportunity cost is the amount of other products that must be forgone or sacrificed to produce a unit of product.

Economic costs for instance relates to opportunity cost in the aspect that the payment must be made to obtain and retain the services of a resource.

The New York City square block would have a greater opportunity cost because it would just cost more money than it's worth to change the lots of the already existing lot.