In the coming years the city of Nashville, TN will spend $2 billion on a new stadium for thier city's NFL team the Tennessee Titans.
Explain why it is incorrect to say that the opportunity cost of that new stadium is the $2 billion. Provide two examples of what opportunity costs of the new stadium actually might be. Finally, evaluate the usefulness of the phrase "net value" or "net benefit" when analyzing opportunity costs.
It is incorrect to say that the opportunity cost of the new stadium is the $2 billion because opportunity cost refers to the value of the next best alternative that is foregone when making a decision. In this case, the $2 billion spent on the stadium is a tangible cost, rather than an opportunity cost.
Two examples of opportunity costs associated with the new stadium could be:
1. Infrastructure development: Instead of spending $2 billion on the stadium, the city could have used that money to invest in improving transport infrastructure, such as building new roads, bridges, or public transportation systems. This investment could benefit the entire city and its residents, enhancing mobility and reducing congestion.
2. Social services and community programs: The $2 billion could have also been allocated to improving social services, education, healthcare, or other community programs. Investing in these areas could have a direct impact on the quality of life for residents, addressing social issues and fostering economic development in different ways.
The phrase "net value" or "net benefit" is useful when analyzing opportunity costs. It helps quantify the overall gain or benefit that emerges after considering all costs and benefits associated with a decision. By considering the net value or net benefit, decision-makers can better assess the potential trade-offs and make more informed choices. Understanding the net value of alternative uses of funds can help prioritize investment options and allocate resources in a way that maximizes overall benefits.