Opportunity cost of your resource is defined as “the value associated with the next best use of that resource (which you must give up).” Decisions you make should reflect your opportunity cost, and not just your out-of-pocket costs. For example, if you decide to spend two hours of your time watching TV, the opportunity cost of your time is the value associated with its next best use (studying, sleeping, or another use).
This exercise will ask you to relate this concept to decision making. When the I-395 Express Lanes first opened in November 2019, the toll was expected to reach up to $30 for drivers in the Northbound lanes to travel a distance of only 8 miles during the morning rush hour. Read the Washington Post story here.
https://www.washingtonpost.com/local/trafficandcommuting/tolling-on-395-express-lanes-starts-sunday-heres-what-you-need-to-know/2019/11/16/07742088-07d4-11ea-818c-fcc65139e8c2_story.html
Post your responses to the following question in the Opportunity Cost discussion forum.
Initial Response: Using the principles of Opportunity Cost and Rational Decision Making, explain why (or why not) drivers might pay up to $30 to save 30 minutes of travel time during the rush hour.
Contribution to Discussion: After you have posted your response, review the posts of your other classmates. Add to your original post and answer this question: How much would you pay to use the HOT lane and why?
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The value associated with the next best use of that resource (which you must give up) is defined as the opportunity cost of your resource. Your decisions should take into account your opportunity cost as well as your out-of-pocket expenses. The potential cost of your time, for example, is the value associated with the next best use of your time if you chose to spend two hours watching TV (studying, sleeping, or another use).
You will be asked to apply this principle to decision-making in this exercise. When the I-395 Express Lanes first opened in November 2019, cars in the northbound lanes were expecting to pay up to $30 for a trip of only 8 miles during morning rush hour. Check out the Washington Post.
