Opportunity Cost Question

tree7

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Posts: 28

Rep:

3 years ago

1. You have two trip packages to choose from.
Package A is all-inclusive.
Package B includes your flight and accommodations, but you must pay for your own food and beverages. What is the opportunity cost of Package B in terms of Package A?

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bio_man

wrote...

Educator

3 years ago

They're asking you to describe the benefit given up by choosing B over A.

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tree7 Author

wrote...

3 years ago

Yes my answer was that opportunity cost is the cost of the all-inclusive vacation, where in this case you wouldn't have to pay the food & beverage expenses, that's the loss of potential gain that you could've got by purchasing Package A. The solution says, "If you said the cost of food and beverages, in the absence of any detailed costs you'd be wrong. Package A probably costs more because it includes the costs of food and beverages, but you have no way of knowing without dollar amounts. Package B might actually be cheaper in total." I don't understand what this has to do with question sort of.

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bio_man

wrote...

Educator

3 years ago

They're not wrong though. Unless you knew exactly what each option costs, and you can't be entirely sure.

But you're not wrong either

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tree7 Author

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3 years ago Edited: 3 years ago, tree7

I think the answer is saying that I'm wrong because I was stating how the loss of potential benefit would be the all-inclusive vacation, but in this case they're saying that it isn't because it most likely costs more, so rather Package B is better, the best forgone alternative, even if we didn't know the prices, which I feel doesn't seem right. I don't want to make this mistake on a test.

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bio_man

wrote...

Educator

3 years ago Edited: 3 years ago, bio_man

Again, I'm going by the most common definition found online. I'm not sure what the details of your assignment are, so I can only go with what I know.

For the record, most definitions online state something along the lines of opportunity cost being the (return on the best option not chosen) minus the (return on the option chosen).

Did your answer address any of these variables?

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tree7 Author

wrote...

2 years ago

This is just a homework question actually, I just wanted some clarification because I was little confused because the answer was different than what I anticipated.
What you said about (return on the best option not chosen) minus the (return on the option chosen) is correct, it does address these variables (Package A) - (Package B).
It's just that the answer (in blue) states that Package B is the better choice in terms of cost, whereas I stated that Package is better because everything in your vacation is included.

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