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Kevin has $20 to spend on summer clothes.

He is looking at shirts, shorts, and flip-flops. Shirts are $10, s...

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Kevin has $20 to spend on summer clothes.

He is looking at shirts, shorts, and flip-flops.
Shirts are $10, shorts are $15, and flip-flops are $10.
He buys one shirt because he thinks that buying the shirt is worth the opportunity cost of the shorts and the flip-flops.
Which statement best evaluates his reasoning?
Kevin has analyzed the situation well.
He purchased a shirt and that purchase cost the opportunity of buying the shorts or flip flops.
Kevin was wrong in his analysis.
He has confused opportunity costs with trade-offs by thinking of both of the lost items as opportunity costs.
Kevin was wrong in his analysis.
The opportunity cost consists of more than the shorts and flip-flops.
It also includes other choices he could have made with the $10.
Kevin has analyzed the situation well.
However, he should also consider the fact that he saved $10 by only purchasing the shirt.

Answer

Kevin has analyzed the situation well.
However, he should also consider the fact that he saved $10 by only purchasing the shirt.
Opportunity cost is the cost of the forgone alternative.
Out of the 3 choices, he only purchased 1 of the choices, the opportunity cost are the other two choices.
However, he is still capable of buying the flip-flops costing $10 but he chose not to do so.
He should consider it as a savings aside from it being a lost opportunity.

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Virtual Teaching Assistant: Colleen R.
Question Level: Basic
Karma: Free
Upload Date: 5/31/2017

This 152 words question was answered by Colleen R. on StudySoup on 5/31/2017. The question contains content related to Business Since its upload, it has received 127 views.

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