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Two questions about opportunity cost

1. Economists make decisions by thinking in terms of alternatives. Why do economists believe there is no such thing as a free lunch?

2. Another situation to think about: Should Michael Phelps mow his own lawn? Suppose Michael can mow his lawn in 30 minutes (due to his athletic ability) or he can hire a gardener who can do the same job in 2 hours. Should the fastest person do the job?

Solution Preview

1. Basically, every time we do something, we don't do something else. For example, say you are offered a free lunch, the cost of taking that lunch is all the other lunches you could have had. You could have had lunch with friends, there is this great place you have always wanted to go to, etc. You could have skipped lunch and worked and made some money. Those ...

Solution Summary

Answers the following two questions in relationship to opportunity costs>

1. Economists make decisions by thinking in terms of alternatives. Why do economists believe there is no such thing as a free lunch?

2. Another situation to think about: Should Michael Phelps mow his own lawn? Suppose Michael can mow his lawn in 30 minutes (due to his athletic ability) or he can hire a gardener who can do the same job in 2 hours. Should the fastest person do the job?

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