Question

Melissa is a self-employed lawyer who chooses a higher-priced restaurant 2 miles from home over a cheaper restaurant 15 miles from home. Which of the following is the most likely explanation for her behavior?

a.The opportunity cost of her time is very low.
b.She doesn't take travel time into consideration.
c.She doesn't like to cook or doesn't know how.
d.The prices at the more expensive restaurant understate the opportunity cost of eating there.
e.The higher monetary cost of the more expensive restaurant is offset by the higher opportunity cost of the lower-priced restaurant

Answer 1

Option (E) is correct.

Step-by-step explanation:

The opportunity cost refers to the benefits that are sacrificed by choosing some other alternative.

In our case, there are two restaurants as follows:

One is 2 miles away from home with higher prices

Second one is 15 miles away from home with lower prices

But Melissa chooses the first one by comparing the opportunity cost associated with each option relative to the other option.

This is because of the higher opportunity cost associated with second restaurant offsets the higher monetary cost of the first restaurant.