When a money price cannot be assigned to a health care action such as a choice an individual makes to exercise to maintain a healthy cardiovascular system, economists use the concept of opportunity cost which values the action according a rule of thumb. as the next best alternative the individual gives up in order to exercise. at the median gym membership price in the residential area. at zero price. as the number of years expected to be added to the person’s life due to exercise.

Answered: When a money price cannot be assigned…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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When a money price cannot be assigned to a health care action such as a choice an individual makes to exercise to maintain a healthy cardiovascular system, economists use the concept of opportunity cost which values the action

		according a rule of thumb.
		as the next best alternative the individual gives up in order to exercise.
		at the median gym membership price in the residential area.
		at zero price.
		as the number of years expected to be added to the person’s life due to exercise.

Expert Solution

Step 1: Introduce the opportunity cost

Opportunity cost is the value of the next best alternative that must be forgone or sacrificed when a decision is made to allocate resources (time, money, effort, etc.) to a particular choice or action.

It represents the benefits or returns that could have been obtained from the next best alternative but were not realized due to the chosen course of action. In the context of the question, it would be the value of the activity or benefit that the individual would have pursued instead of exercising.

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