Reference no: EM131644763

1. True/False, Explain: Assume you own an office building. The opportunity cost of using this building as office space for your own business is the aggregate value of all of the foregone alternative uses for the space.

2. Stephen is on a skiing holiday and woke early to hit the slopes. He has been standing in the liftline for twenty minutes, waiting to get on the chairlift for his first time skiing at the ski resort. He paid $30.00 for a (nonrefundable) lift ticket which is good for the entire day. The weather is getting bad, but if he waits five more minutes he will definitely get on the chairlift and be able to ski for twenty minutes. According to the principles of sunk cost and opportunity cost decision-making, and assuming no other considerations affect his decision, which of the following statements best describes the rationale he should use to decide whether it is worth waiting the extra five minutes? Multiple Choice: Choose the single best answer and provide a brief explanation.

a. He should compare the reduction in his satisfaction caused by twenty-five minutes of waiting and paying $30.00 for a lift ticket to the increase in satisfaction he will get from skiing twenty minutes.

b. As in (a), he should compare the reduction in satisfaction caused by waiting for twenty-five minutes and the benefits he will get from skiing twenty minutes, but he should not consider the cost of the lift ticket since that is good for the whole day.

c. He should compare the reduction in satisfaction he suffers by waiting five more minutes to the increase in satisfaction of skiing twenty minutes.

d. He should keep waiting and skiing for the rest of the day so that the money he spent on the lift ticket will not have been a waste.