Asked by kirston seldon on Jun 25, 2024
Verified
Joe sold gold coins for $1,000 that he bought a year ago for $1,000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money because he could have received a 3 percent return on the $1,000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of
A) opportunity costs.
B) marginal benefits that exceed marginal costs.
C) imperfect information.
D) normative economics.
Opportunity Costs
The loss of potential gain from other alternatives when one alternative is chosen; the value of the next best choice.
Financial Investment
The purchase of a financial asset (such as a stock, bond, or mutual fund) or real asset (such as a house, land, or factories) in the expectation of financial gain.
Bank Certificate
A document issued by a bank certifying the deposit of money or financial instruments with a certain value.
- Discover and examine opportunity costs across different economic environments.
Verified Answer
PG
Peter GardnerJun 29, 2024
Final Answer :
A
Explanation :
The economist's analysis incorporates the idea of opportunity costs, which refers to the benefits that Joe missed out on by choosing to invest in gold coins instead of a more profitable alternative, such as a bank certificate of deposit with a 3 percent return.
Learning Objectives
- Discover and examine opportunity costs across different economic environments.