This weekend, Marcella can work at Pets4U for $10 an hour for 6 hours each day.

Question

Alternatively, she could study for her Economics and American Literature tests which are both scheduled for Monday. Marcella chooses to go to work.

What is Marcella's opportunity cost of her decision?

Niether, since she will only benefit from this choice
Studying for her Economics and American Literature Tests

$120

Answer 1

The opportunity cost of a decision is the value of the best alternative that is given up. In this case, Marcella decided to work instead of studying for her tests.

If she works for 6 hours each day at $10 an hour, her earnings for the weekend would be:

\[ \text{Earnings} = 10 \text{ (dollars/hour)} \times 6 \text{ (hours/day)} \times 2 \text{ (days)} = 120 \text{ dollars} \]

Thus, the monetary value of what she is giving up by not studying is the opportunity cost. However, we also need to consider the value of the studying itself.

In this scenario, the opportunity cost of Marcella's decision to work rather than study is the combination of the potential benefits from studying for her tests, as well as the $120 she could earn from working.

Therefore, the opportunity cost of her decision is both the value she gives up from studying (the potential improvement in her test scores) and the $120. But if we are asked to quantify it in monetary terms, her opportunity cost in strictly financial terms would be $120.

So, the opportunity cost of Marcella's decision to work is:

$120 (the earnings lost from choosing to study instead).