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16 July, 15:14

If a new home can be constructed for $150,000, what is the opportunity cost of federal defense spending, measured in terms of private housing? (Assume a defense budget of $600 billion.)

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  1. 16 July, 16:08
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    4 million houses

    Explanation:

    Opportunity cost is the forfeited benefit as a result of choosing one option over others. Its value equals the cost of the next best alternative.

    The cost of constructing a new home is $150,000. If the Federal Defence has a budget of $600 billion, the opportunity cost of spending that amount will be the equivalent number of units that can be built by the amount.

    To calculate the number of units = $600 billion divided by $150,000

    = $600,000,000,000 / $150,000

    =4,000,000

    =4 million units
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