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: Allocating a square block in the heart of New York City for a surface parking lot or allocating a square block at the edge of a typical suburb for such a lot? Explain.

Answer 1

Answer:

Opportunity cost is a situation whereby a potential gain in doing or choosing something is lost as a result of choosing the other. For example, between using electricity or solar panel for water  heating in a house. When the solar panel is used, the potential gain of using electricity is lost. this loss is called opportunity cost.

"Allocating a square block in the heart of New York City for a surface parking lot or allocating a square block at the edge of a typical suburb for such a lot"  would entails the greatest opportunity cost. This is because, New York is already crowded with people and lack of parking lots for cars thereby increasing the $CO_{2}$ content of the city. Not allocating the square block at the edge of a typical surbub for such a lot would put undue pressure in the heart of the city, New York.

Explanation: