Suppose you own a courier service and you use two types of delivery vehicles - Model A,which costs $30 000 to purchase,and Model B,which costs $50 000 to purchase.You have a budget of $300 000 for the purchase of new vehicles.What is the opportunity cost of one Model B vehicle?
A)0
B)3/5ths of a Model A vehicle
C)5/3rds of a Model A vehicle
D)5 Model A vehicles
E)3 Model A vehicles

Question

Quizplus · Accepted Answer

The opportunity cost refers to the value of the next best alternative foregone. In this case, if we choose to purchase one Model B vehicle, we forego the opportunity to purchase a certain number of Model A vehicles.

To determine how many Model A vehicles we could purchase with the same budget, we can divide the total budget by the cost of one Model A vehicle:
300,000/30,000 = 10 Model A vehicles

Therefore, the opportunity cost of one Model B vehicle is the number of Model A vehicles we could purchase with the same amount of money:
50,000/30,000 = 5/3 Model A vehicles

So the best choice is (C) as it correctly calculates the opportunity cost of one Model B vehicle.

Suppose You Own a Courier Service and You Use Two