📚 Learning Guide
Finding Optimal Choices
hard

In the context of making optimal economic choices, which scenario best illustrates the relationship between opportunity cost, marginal benefit, and risk assessment?

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Choose the Best Answer

A

Choosing to invest in stocks instead of bonds, considering the higher potential return (marginal benefit) but accepting the risk of loss (opportunity cost).

B

Deciding to purchase a new car over repairing an old one, ignoring potential savings from the repairs.

C

Opting to save money by not going out, without evaluating the benefits of social interactions.

D

Investing in a new business venture without considering the risks involved.

Understanding the Answer

Let's break down why this is correct

Answer

When making economic choices, it's important to understand opportunity cost, marginal benefit, and risk assessment. Opportunity cost is what you give up when you choose one option over another. For example, if you decide to spend your time studying for an exam instead of going to a party, the opportunity cost is the fun and socializing you miss out on. Marginal benefit refers to the additional benefit you receive from a choice, like getting a higher grade from studying. If the extra study time gives you a better score that helps you in the long run, it may outweigh the risk of missing out on the party, leading you to make an optimal choice.

Detailed Explanation

This choice shows how people weigh the benefits of investing in stocks against the risk of losing money. Other options are incorrect because This option misses the idea of weighing costs and benefits; This choice overlooks the value of social interactions.

Key Concepts

opportunity cost
marginal benefit
risk assessment
Topic

Finding Optimal Choices

Difficulty

hard level question

Cognitive Level

understand

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