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The local Taco Hut charges the same price for everything on its menu: $3 will buy a taco, a burrito, or nachos. You buy the taco and think that if you had not purchased the taco, you would have purchased the burrito. The opportunity cost of the taco is:

(a) the $3.

(b) the burrito.

(c) the $3 and the burrito.

(d) the $3, the burrito, and the nachos.

(e) none of the above.

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Related questions

Exercise 1. Taco Del Mar has completed a study of weekly demand for its tacos in Washington State’s regional markets.

The study developed the following demand function: Q = 500 – 1,100P + 1.2A + 60Pop + 750Pc

where

Q is the number of tacos sold per store per store per week;

A is the level of local advertising expenditure in dollars;

Pop is the local population in thousands;

and Pc is the average taco price of local competitors.

For the typical Taco Del Mar outlet, P = $1.50, A = $1,200, Pop = 50, and Pc = $1.40

Use the Lab 3 Excel file and program the elasticity worksheet (using the appropriate formulas) to answer the following:

a. Estimate the weekly sales for the typical Taco Del Mar (given the above information).

b. What is the current own price elasticity for Taco Del Mar tacos?

c. Should Taco Del Mar raise its taco prices? Discuss why or why not.

d. Using Excel calculate the marginal revenue if Taco Del Mar increases its taco price to $1.70.

e. Calculate the advertising elasticity for Taco Del Mar tacos.

f. Use the advertising elasticity to predict the change in Q from a 1% increase in advertising expense.

g. Use your demand function to calculate the change in Q from a 1% increase in advertising expense.

h. Calculate the cross price elasticity of local taco competitors.

i. Are the competitor tacos complements or substitutes? Discuss why or why not.

What is the opportunity cost of seeing a movie?

A. Price of the ticket

B. Price of ticket and popcorn you buy

C. Total cash spent on seeing the movie and value of your time

D. None of the above

3. Assume a desert island economy in which labor is the only scarce resource and labor can be used to gather food (coconuts) or to build huts. There are six equally productive individuals on the island. Each inhabitant can gather 25 coconuts in one day or build one hut in one day.

a. Does this production possibilities schedule exhibit constant or increasing opportunity costs? _______________

b. Suppose the workers on the island are currently making two huts along with their work collecting coconuts. Compute the opportunity cost of building one (1) more (i.e. an additional) hut in one day. ___________

c. If half the workers build huts and half the workers gather coconuts, what would be the production of the island? Number of coconuts_________ Number of huts __________

d. Assume that in one day, two huts were built and 75 coconuts were gathered. What does this situation depict? (I.e. what might cause this result to occur on the island?)

e. What would have to occur on the island for three huts to be produced along with 100 coconuts? I.e. what would be true about the resource use?

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