Answer to Question #115926 in Microeconomics for desmond

Question

The university has built a new parking garage. There is always an available parking spot,
but it costs $1 per day. Before the new garage was built, it usually took 15 minutes of
cruising to find a parking space. Compare the opportunity cost of parking in the new
garage with that in the old parking lot. Which is less costly and by how much?

Answer 1

Opportunity cost refers to the cost benefit that is forgone as a result of choosing one decision. The opportunity cost of parking in the new garage is $1 on the other hand, the benefits of parking in the garage is to save the time that an individual could have spent looking for a parking space. The opportunity cost of not parking in the garage is the 15 minutes that will be spent looking for a parking space.

The garage is less costly since paying one dollar a day you will be guaranteed of a secure parking space where the vehicle will be protected from other external damages.