Question

An owner of a small firm needs to hire some managers. Assume that each manager has time to

do only one task. Task A is worth $100,000 to the owner, Task B is worth $75,000, and Task C is
worth $50,000. The owner hires only two managers, having one to do Tas A and the other Task
B. What is the opportunity cost of Task B?

Answer 1

The opportuniy cost is the cost of forgoing one alternative.

In this case, the opportunity cost of Task B is the value of Task C, which is $50,000.

This is because the owner has hired two managers, one to do Task A, and another to do Task B, which leaves Task C unattended.