The Stogie Shop,a cigar store in the mall,sells hand-rolled cigars for $10.00 and machine-made cigars for $2.50 each.What is the opportunity cost of buying a hand-rolled cigar?
A)4 machine-made cigars
B)one-quarter of a machine-made cigar
C)$10.00
D)$2.50

Question

Quizplus · Accepted Answer

The opportunity cost of buying a hand-rolled cigar is the value of the next-best alternative forgone, which in this case is the machine-made cigar. To determine the opportunity cost, we need to calculate how many machine-made cigars we could buy with the same $10.00 that we would spend on a hand-rolled cigar. 
$10.00 / $2.50 (cost of one machine-made cigar) = 4 machine-made cigars 
Therefore, the opportunity cost of buying a hand-rolled cigar is 4 machine-made cigars. So, the best choice is option A.

The Stogie Shop,a Cigar Store in the Mall,sells Hand-Rolled Cigars