Question

Joe sold gold coins for $2,500 that he bought a year ago for $2,500. His economist friend points out that in fact he did lose money because he could have received a 1 percent return on the $2,500 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of:

A. Marginal benefits that exceed marginal costs.
B. Opportunity costs.
C. Imperfect information.
D. Normative economics.

Answer 1

The economist's analysis in this case incorporates the idea of opportunity costs. Joe could have earned a 1 percent return on the $2,500 if he had bought a bank certificate of deposit instead of purchasing gold coins.

Step-by-step explanation:

The economist's analysis in this case incorporates the idea of opportunity costs. Opportunity cost refers to the potential benefits that could have been gained by choosing an alternative course of action. In this case, Joe could have earned a 1 percent return on the $2,500 if he had bought a bank certificate of deposit instead of purchasing gold coins.