Answer+Keys

====1. Mike is a street vendor who sells sodas and ice cream. Suddenly, he meets Ku-Hara, a member of KARA asking for him to sell her the ice cream at $3 in exchange for the autograph that has a value of around $20. The ice cream costs $10. Should Mike sell the ice cream?====

-Yes, he should sell the ice cream. Even though Mike can't directly get fast cash from Hara and may seem to lose $7, he is actually making more money when thinking about the $20 worth autograph. In economics, one has to think about the implicit value, not only the external value.

2. What is the opportunity cost of reading a book?

-In this case, time would be considered as the opportunity cost. If one spent 3 hours reading the book, during this 3 hours, one could have made money through part-time jobs or do other things that have values. As a result, the opportunity cost of reading a book includes all these one could have done in three hours.