Suppose There Are Only Three Alternatives to Attending a "Free

question 107

Multiple Choice

Suppose there are only three alternatives to attending a "free" social event: read a novel (you value this at $10) ,go to work (you could earn $20) ,or watch videos with some friends (you value this at $25) .The opportunity cost of attending the social event is

• A)$10.
• B)$20.
• C)$25.
• D)$45.
• E)$55.

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Definitions:

Funds

Financial resources that are saved or obtained for a specific purpose or project, often pooled together from multiple sources.

Discount Rate

The interest rate charged to commercial banks and other financial institutions for the loans they take from the central bank or the rate used in discounted cash flow analysis to determine the present value of future cash flows.

NPV

NPV (Net Present Value) is a financial metric that calculates the present value of expected future cash flows of an investment, subtracting the initial investment cost.

Initial Cash Outflow

The initial amount of money paid out or expended, typically for an investment or purchase, before any returns are considered.