Question

Discussion: Answer each section below in separate paragraphs.

1. Describe opportunity cost, and then explain whether or not it’s an out-of-pocket cost.
   
   
2. If you were offered a job that required you to completely stop attending college (onsite or online), explain how would you apply the concept of opportunity cost to help you decide whether or not to take the job or continue your college education? In your explanation, be sure to include all of the factors you can think of that would go into your decision.
   
   
3. 1.  Set forth the law of diminishing marginal utility.

C. 2. Are there any exceptions to this law? Explain why or why not.

Answer 1

Opportunity cost is a cost which we actually forgo for using an alternative. It is a cost of using next best alternative. Whenever we have opportunity of doing two alternatives and we decide to do or use one alternative then the earning which we could have get from the sacrificed alternative is the opportunity cost to me. It is the lost opportunity of using another one. Opportunity cost is not an out-of-pocket cost because here we are not doing any kind of payment or there is no transfer of money to any party. It is basically a cost which we are loosing in terms of non-monetary values. It is real economic cost but not accounting cost.

If I get a offer of a job which requires full time participation which will completely stop the college education. Here the opportunity cost to me is the level of education which we are loosing and the job which we could have get after completing the education. Basically the opportunity cost is loss of those higher paid job opportunities after completing the college education. But we can gain in terms of current job's salary which I have offered and the college fees which I don't need to pay because I am not going to take college education. If the salary of higher paid job which we could have get after completing college education is greater than the salary of current job plus the college fees which I don't require to pay then it is better to sacrifice current job opportunity. Because the better alternative in this case is the job opportunity which I can get after completing college education. In this can I shall continue college education. If the salary of a job which we can get after completing education is less than the current job salary plus the education fees then I shall continue the current job.

1. The law of diminishing marginal utility states that if continue to take or consume more and more of one good then the extra utility which we can get by consuming those extra unit will be less and less. It means the marginal utility of getting an extra unit will be less and less if continue to consume. At one time it will reach to zero and can be negative if we still continue to consume.

There is some cases where this law can not be applied let suppose in case of hobby. If someone take more and more hobbies it's satisfaction level increases. In case people who thinks more wealth will give him more satisfaction then consuming more and more wealth for that person will give more satisfaction. If I get any type of case where extra consuming is giving me more and more extra satisfaction there the law of diminishing marginal utility will not hold.