1. Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000
per year to rent the location and buy the stock. In addition, she would have to quit her $50,000
job as an accountant.
a. Define opportunity cost.
b. What is your aunt’s opportunity cost of running a hardware store for a year? If your aunt
thought she could sell $510,000 worth of merchandise in a year, should she open the
store? Explain.
2. Suppose that your college charges you separately for tuition and for room and board.
a. What is the cost of attending college that is not an opportunity cost?
b. What is an explicit opportunity cost of attending college?
c. What is an implicit opportunity cost of attending college?
3. A commercial fisherman notices the following relationship between hours spent fishing and the
quantity of fish caught:
Hours Quantity of fish (in pounds)
0 0
1 10
2 18
3 24
