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Onli, ? tmported From lE sf learningadmin sf SuccessFactors tean e Keep the Highest: 12 Attempts: 3. Problems and Applications Q3 Consider the outdoor activity of horseback riding. ume that the rental cost of riding equipment is $50 and horse rental costs $95. If you go horseback riding, you would also wear the riding boots you purchased last year for $150. If you do not go horseback riding, you could either work at your part-time job, which would earn you $100, or study at the library, which you value at $40. Suppose that you were planning to spend Saturday working at your part-time job, but a friend asks you to go horseback riding. The opportunity cost of going horseback riding is S Now suppose you had been planning to spend the day studying at the library What is indluded in the opportunity cost of going horseback riding in this case? Check all that apply The rental of any riding equipment you need The cost of the riding boots you purchased last year The cost of horse rental The wages you forgo by going horseback riding The value of your time spent studying

Solution

The opportunity cost is the benefit which one could have received but lost because he chose another alternative.

So, instead of a part-time job, when he went for horse riding, the opportunity cost is the benefit lost which could have received from the part-time job. so the opportunity cost of horse riding is the benefit from a part-time job which is $100.

Now instead of the horse riding, when studying at the library was chosen, the opportunity cost will include all the costs associated with the horse riding, which are;

1. rental of riding equipment

2. cost of horse rental