Chapter 11, Problem 1P

To determine

The impact on the cost of growing strawberries when a housing developer offers thrice the rate is to be determined.

Answer to Problem 1P

The cost of growing strawberries on one's own land, if a housing developer offers three times of what one thought it was worth of, is the amount that the housing developer is offering for the land.

Explanation of Solution

Costs associated with an action are the payments to be incurred in terms of time, money, etc.

One type of cost is the opportunity cost. Opportunity cost of an action is the cost of the next best alternative given up. Thus, if one chooses to grow strawberry on one's own land, he is forgiving the price that could be fetched by selling the land to the housing developer for three times the expected price of land. Hence, The cost of growing strawberries on one's own land if a housing developer offers three times of what one thought it was worth of is the amount that the housing developer is offering for the land.

Economics Concept Introduction

Costs:

Costs associated with an action are the payments to be incurred in terms of time, money, etc.

Opportunity cost:

Opportunity cost of an action is the cost of the next best alternative given up.