A region is considering two sites on which to locate a new wastewater treatment plant. Site A has been owned by the region for five years and the region initially paid $200,000 for the land. The current market value of Site A is $400,000. Site B is land the region would have to purchase for $300,000. What is the social opportunity cost of each site?

Question

Quizplus · Accepted Answer

The social opportunity cost of using Site A is the current market value of $400,000, as this is the value that society forgoes if the site is used for the wastewater treatment plant instead of being sold or used for another purpose. For Site B, the social opportunity cost is the purchase price of $300,000, as this is the amount that would need to be spent to acquire the site for the project.

A Region Is Considering Two Sites on Which to Locate