Investing in Watches

The values of premiumsecond-hand watches have been rising and a Luxury Investment Index says they are expected to appreciate 68 percent over 10 years. But investing in watches is risky. Their pricesdon't always rise.

Source: New York Times, September29, 2015

What is the cost of buying awatch? What is the opportunity cost of owning awatch?

Does owning a watch create an economic profitopportunity?

The cost of buying a watch is______. The opportunity cost of owning a watch is______.

A.

smaller the longer you own thewatch;

zero becausetoday's watches are maintenance free

B.

zero if it is agift;

zero if it is a gift

C.

the best thing you give up to buy thewatch;

the money you pay to buy the watch

D.

the best thing you give up to buy thewatch;

the interest forgone on an alternative asset plus the depreciation of the watch

Owning a watch______ create an opportunity for economic profit______.

A.

cannot;

because when a watch stops working it has no value

B.

cannot;

because youcan't earn revenue from a watch

C.

can;

only if the watch has a life greater than 10 years

D.

can;

if the gain in the value of the watch is greater than the normal profit you would have earned by investing the money in the next best alternative