John's Budget Is Such That He Can Afford Either a Computer

question 132

Multiple Choice

John's budget is such that he can afford either a computer or a Caribbean vacation,both of which cost the same.Which of the following statements about his opportunity cost is correct?

• A)The opportunity cost of a Caribbean vacation is the money John pays for the vacation.
• B)The opportunity cost of the vacation is the same as the opportunity cost of the computer because John can afford only one or the other.
• C)There is nothing to say about the opportunity cost because we don't know how much the computer or the Caribbean vacation costs.
• D)The opportunity cost of going on a vacation is the loss from not being able to buy the computer.
• E)The opportunity cost of the computer is the total cost of the computer and the Caribbean vacation.

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Definitions:

Uncertainty

The state of having limited knowledge where it is impossible to exactly describe the existing state, a future outcome, or more than one possible outcome.

Investing Activities

Activities involving the buying and selling of long-term assets and investments, excluding those considered as cash equivalents.

Financing Activities

Activities that result in changes in the size and composition of the contributed equity and borrowings of an entity, often reflected on the cash flow statement.

Statement Of Cash Flows

A financial report that shows the cash inflows and outflows from operating, investing, and financing activities over a period.