which of the following decisions wold entail the largest opportunity cost: allocating a square block in the?

Question

heart of New York City for a surface parking lot or allocating a square block at the edge of a typical suburb for such a lot? Explain.

Answer 1

Opportunity costs have to deal with the concept of highest and best use. Generally speaking, the block in the heart of NYC would be more profitable as a high rise office building as opposed to a surface parking lot. The opportunity costs of the parking lot would be immense when compared to the high rise office building.

The square block on the fringe of suburbia would generally have a more acceptable opportunity cost.

Answer 2

An opportunity cost which arises from "lost" profits. Consider NYC, its economy alone is worth millions. It is a major commercial center - you'd be hard pressed to find an average New Yorker who feels that they're getting a decent amount of square footage for living space for the amount of money they are paying.

Now, imagine, if we turned NYC into a parking lot, how much money would be "lost." Even if you found enough cars to fill up all the parking spaces, the revenues would no doubt be a fraction of what NYC pulls in every day. This means that you would be "surrendering" those profits to do something else. Sure, you might make a few bucks running that parking lot, but you'd be losing a whole lot more than if you owned the land upon which Manhattan lies

A suburb is generally considered a "sleeping community" b/c of its main characteristic - it's where most people live, not work. While some suburbs are pricey (b/c of their location and amenity value) it would still be impossible to claim a suburb is "worth more" than NYC.