Question

A group of college students start a dog-walking service. At the end of the first month, they meet to discuss their business performance. Which statement reveals sound economic thinking in their analysis? A. We were profitable, because our total costs exceeded our total revenues. B. In considering our costs, we need to include what we could have earned by working at part-time jobs instead. C. The ethics of dog ownership need to be evaluated before proceeding with our business. D. The only relevant consideration is the total of our explicit costs. E. We want to continue to maximize the number of utils we gain as a business.

Answer 1

Answer:

B. In considering our costs, we need to include what we could have earned by working at part-time jobs instead.

Explanation:

When the group of college students include, in their analysis of costs, what they could have earned by working at part-time jobs instead, they are including the opportunity cost.

The opportunity cost is what is given up to do something: the cost of not choosing an alternative.

Including opportunity costs in their cost-benefit analysis reveals sound economic thinking.