Question

Alex can spend spring break either working at home for $80.00 a day for five days or go to Cabo San Lucas, Mexico for the week. If she stays at home her expenses total about $100. If she goes to Cabo, her expenses will total about $700.00. What’s her opportunity cost of going to Cabo? Can you think of any non-monetary cost associated with going to Cabo San Lucas? What would you advise Alex to do and why? Alex can spend spring break either working at home for $80.00 a day for five days or go to Cabo San Lucas, Mexico for the week. If she stays at home her expenses total about $100. If she goes to Cabo, her expenses will total about $700.00. What’s her opportunity cost of going to Cabo? Can you think of any non-monetary cost associated with going to Cabo San Lucas? What would you advise Alex to do and why?

Answer 1

Alex's opportunity cost of going to Cabo is $900, considering the income she foregoes and the extra expenses incurred. Additionally, non-monetary costs such as risks and fatigue may influence her decision. She should weigh both financial and non-financial factors to make her decision.

Step-by-step explanation:

The opportunity cost of going to Cabo for Alex is the foregone income she would have earned if she stayed at home to work, plus the difference in expenses between staying home and going to Cabo. If Alex works at home, she will earn $80.00 a day for five days, which totals to $400.

However, her expenses for staying at home are $100, so her net income would be $300 ($400 earnings - $100 expenses). On the other hand, if she goes to Cabo, her expenses are $700.00. Therefore, the opportunity cost of going to Cabo is her net income of staying home ($300) plus the additional expenses of going to Cabo ($600), totaling $900 ($300 + $600).

There can also be non-monetary costs associated with going to Cabo, such as the potential risk of traveling, missing out on local events, or the exhaustion from travel.

Ultimately, Alex's decision should weigh both the financial and non-financial factors. If the experience of going to Cabo is worth more to her than the $900 opportunity cost and possible non-monetary costs, then she might choose to travel. However, if the monetary opportunity cost is too significant for her current financial situation, or she values the benefits of working and staying home higher, then she should opt to work over spring break.