Figure 1.3

-The city of Austin can buy roads or light rail. If 10 miles of roads cost $1 million and 2 miles of light rail cost $10 million, what is the city's opportunity cost of 1000 miles of roads?

Question

Figure 1.3
 
-The city of Austin can buy roads or light rail. If 10 miles of roads cost $1 million and 2 miles of light rail cost $10 million, what is the city's opportunity cost of 1000 miles of roads?

Quizplus · Accepted Answer

The opportunity cost of 1000 miles of roads is the value of the next best alternative that is given up. In this case, the next best alternative is 200 miles of light rail, which costs $100 million.

Figure 1.3 -The City of Austin Can Buy Roads or Light Rail