Jake opens a pig farm in Idaho. To start his farm, he uses his ...

[vicotolentino]

Jake opens a pig farm in Idaho. To start his farm, he uses his entire 50,000 of savings from his savings account. The bank was paying him 2,500 interest on his saving. Explain why the 2,500 is one of Jake's costs.
 
  What will be an ideal response?

Question 2

In the figure above, the quantity of low-skilled labor employed is
 
  A) 2,000 hours per day.
  B) 4,000 hours per day.
  C) 5,000 hours per day.
  D) 7,000 hours per day.

[duke02]

Answer to Question 1

When Jake provides the 50,000 to finance his farm's operations, he forgoes the 2,500 in interest. Thus the opportunity cost of the 50,000 is the interest income forgone and so the 2,500 is an opportunity cost of running the farm.

Answer to Question 2

C