Question

Joe sold gold coins for $1,000 that he bought a year ago for $1,000. he says, "at least i didn't lose any money on my financial investment." his economist friend points out that in effect he did lose money because he could have received a 3 percent return on the $1,000 if he had bought a bank certificate of deposit instead of the coins. the economist's analysis in this case incorporates the idea of

Answer 1

The economist's analysis in the scenario painted above incorporates the idea of OPPORTUNITY COST.
Opportunity cost refers to a value or a benefit which must be given up in order to enjoy or acquire another benefit. Because resources are scarce, one always has to make decision about how to use one's resources efficiently. In the scenario given above, Joe had the opportunity to put his money in a fixed deposit account or to use it to buy gold coins; he choose the latter given up the former. Thus, the former, which he gave up is his opportunity cost.<span />

Answer 2

Answer:

The answer is Opportunity Cost.

Explanation:

Joe sold gold coins at the same price on which he bought them. In his opinion, he is at a break even point with no profit no loss situation. But his economist friend told him that he is at a loss because he could have earned 3% return on his investment if he had bought the bank certificates of deposits.  So this Joe missed an opportunity of earning 3% return on investment. So we can assume that Joe hold the gold coins at an opportunity cost of 3% return on investment.