Asked by
Tamara Harris
on Oct 09, 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 forfeiture of possible benefits from other options when selecting a specific 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) or the building of such assets in the expectation of financial gain.
Certificate of Deposit
A savings certificate with a fixed maturity date and specified fixed interest rate, often issued by banks.
- Understand the concept of opportunity cost and its significance in economic decision-making.
- Acknowledge the importance of assessing marginal benefits versus marginal costs.
Verified Answer
CE
Learning Objectives
- Understand the concept of opportunity cost and its significance in economic decision-making.
- Acknowledge the importance of assessing marginal benefits versus marginal costs.