Question

Joe sold gold coins for $1000 that he bought a year ago for $1000. 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 $1000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of what?
opportunity costs T/F

Answer 1

Answer:

TRUE

Explanation:

Opportunity cost refers to those costs that can help us save more money. When we move from one investment to another, then the additional income from the other investment is called opportunity cost.

In this case, if Joe chooses Invest in a bank deposit in the place of Gold coins, he can enjoy 3% more return at the place of no profit and loss, so Joe had loss his 3% opportunity cost.