Lori and Jon: A Tale of Opportunity Cost

What can we infer from Lori clipping coupons out of the Sunday newspaper while Jon does not?

a. Lori's opportunity cost of time is higher than Jon's opportunity cost of time.

b. Lori's probability of winning a lottery is higher than that of Jon's.

c. Lori's probability of winning a lottery is lower than that of Jon's.

d. Lori's opportunity cost of time is lower than Jon's opportunity cost of time.

Final answer:

Lori's clipping of coupons suggests that she values the savings from doing so more than other activities she might do with her time, indicating her opportunity cost of time is lower than Jon's, who does not clip coupons.

The student's question about Lori and Jon clipping coupons and their respective opportunity costs of time can be addressed through economic principles.

In economics, the concept of opportunity cost refers to the next best alternative forgone when making a choice. If Lori is spending time clipping coupons, this implies she values the savings from coupons more than any other activity she could have undertaken in that time. Essentially, her opportunity cost for that time is lower than the benefits she gains from clipping coupons.

Conversely, Jon does not clip coupons, suggesting that he values his time more than the savings he might get from couponing; thus, his opportunity cost of time is higher. Therefore, Lori's actions imply that her opportunity cost of time is likely lower than Jon's.

← Understanding the different rating methodologies used for aarp supplemental insurance plans One product company breaks even →