Why might the money price for something be higher than the opportunity cost? Why might it be lower? Give an example of each to illustrate your answer
Money price can be higher than opportunity cost if the good or service has no alternative use. An example might be hiring unemployed persons to perform labor. Because the next best use of the labor has zero monetary value, the money cost of the task is above the opportunity cost. The opportunity cost can be higher than the money price if one ignores implicit costs, e.g., time, in computing cost. One example is the opportunity cost of attending college.
You might also like to view...
The natural unemployment rate and the expected inflation rate are constant when moving along the ________, which shows a tradeoff between ________ and ________
A) short-run Phillips curve; inflation; employment B) long-run Phillips curve; inflation; unemployment C) aggregate demand curve; inflation; employment D) aggregate supply curve; inflation; unemployment E) short-run Phillips curve; inflation; unemployment
Suppose the typical household spends $3,500 on goods and services during the month of January, and $4,300 on the same goods and services in February. Using January as the base period, what is the consumer price index for February?
a. 151.4 b. 81.4 c. 55.1 d. 122.9