Question

Sadie is getting ready to go to work where she earns $70 a day as a day laborer. Her friend Caroline calls her and asks her to go swimming with sharks for the day. Sadie decides to go with her. Sadie's choice implies that her opportunity cost of working is:

1. equal to $70.
2. less than $70.
3. greater than $70.
4. Cannot say without more information

Answer 1

The correct answer is option 2.

Step-by-step explanation:

Sadie works as a day laborer and earns $70 a day.

Her friend asked her go to swimming with shark.

She decides to go swimming instead of work.

This implies that her opportunity cost of swimming is $70.

But if chooses to go swimming instead, her opportunity cost for work must be lesser than $70.

The opportunity cost of an economic decision is the cost of giving up the second best alternative.