A Region Is Considering Two Sites on Which to Locate

question 18

Multiple Choice

A region is considering two sites on which to locate a new wastewater treatment plant. Site A has been owned by the region for five years and the region initially paid $200,000 for the land.The current market value of the site is $400,000.Site B is land the region would have to purchase for $300,000.What is the social opportunity cost of each site?

• A)$200,000 for Site A; $300,000 for Site B
• B)$300,000 for Site A; $300,000 for Site B
• C)$400,000 for Site A; $300,000 for Site B
• D)The social opportunity cost should be state for the project, not each site and would be equal to the lowest value for either site, $200,000

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Definitions:

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

Raw Material Costs

The expense associated with the basic materials required in the production of goods.

Direct Labour Costs

Direct Labour Costs refer to the wages paid to workers directly involved in manufacturing or producing goods, in contrast to indirect labor involved in supportive roles.

Building Rental Costs

The expenses incurred for leasing a facility or space for business operations.