We learned in econ that when you calculate the opportunity cost of a decision, you add the explicit costs and implicit cost for any economic decision you make. I have seen some examples online that have confused me a little. Here are a couple of examples.Example #1:In some cases, realizing the opportunity cost can alter behavior. Imagine, for example, that you spend $8 on lunch every day at work. You may know perfectly well that bringing a lunch from home would cost only $3 a day, so the opportunity cost of buying lunch at the restaurant is $5 each day (that is, the $8 buying lunch costs minus the $3 your lunch from home would cost). $5 each day does not seem to be that much. Is this correct? I thought you add explicit and implicit costs together to get the O.C.. Is it $3?Example #2:If I had to choose between a New York Yankee Hat that cost $25 and a New York Red Bulls Cap that is worth $30. I end up choosing the Red Bulls cap. Is my opportunity cost $55(Explicit Implicit)? Or is my O.C. cost or is it $5 $30-$25= $5? Example #3:Geoff makes £200 an hour as a lawyer specialising in workplace injury claims. He is considering paying someone £500 a month to clean his swimming pool (which takes 2 hours each time, 4 times each month). If he decides to do it himself, it will take 12 hours a month. What is Geoff’s opportunity cost if he decides to clean his own pool?If Geoff cleaned his own pool he would lose earning potential equalling 12 x £200 = £2400 per month The opportunity cost of cleaning the pool himself = £2400 – 500 = £1900Is his opportunity cost really $1900? Shouldn’t his opportunity cost be $2900? Don’t you add up implicit and explicit costs?Can you please explain why this is different from your Ultimate Review packet problem of where Spencer gives up working 5 hours for $8 hour and goes to a baseball game for $30. The opportunity cost is $70. $30(explicit) $40 (implicit). How is this different from the two previous examples? Can you please explain? Is it as simple as that the good is similar and would take the same time that you need to subtract the difference of the explicit costs to figure the opportunity cost? Thank you for your time.Sincerely,A Confused econ student.

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