Zoe's grandparents are excited about finally paying off their mortgage, because, as they say, "Our cost of housing is now zero." Zoe should explain to them the economic principle of:

Question

Quizplus · Accepted Answer

The economic principle being referred to here is opportunity cost. By stating that their cost of housing is now zero, Zoe's grandparents are overlooking the fact that they are giving up the opportunity to sell the house and use the proceeds for other purposes, such as investing in stocks, traveling, or donating to charity. While it is certainly satisfying to have a fully paid-off mortgage, it is worth considering the trade-offs involved in holding onto a larger asset than necessary.

Zoe's Grandparents Are Excited About Finally Paying Off Their Mortgage