Suppose a student decides to spend two hours working at a part-time job instead of studying for an exam. She earns $40 from the job but scores 10 points lower on the exam than she otherwise would have. What is the opportunity cost of her decision?

Question

BlackTom AI · Accepted Answer

Opportunity cost equals the value of the next best alternative that you give up when you make a choice. In this case the student chose working for two hours instead of studying.

1) Relevant concepts
- Opportunity cost: the forgone benefit from the best alternative use of time/resources.
- Explicit benefit vs. forgone benefit: money earned is an explicit benefit she receives; opportunity cost is what she sacrifices by not choosing the alternative.

2) Step-by-step reasoning
- Identify the two relevant options the student considered: (A) work two hours and earn $40, (B) study for the exam and earn a higher exam score.
- She chose A (work) and thereby did not choose B (study).
- The next best foregone alternative is the improvement in exam performance she would have achieved by studying.

3) Intermediate steps / simple comparison
- Outcome of working: +$40, but exam score is 10 points lower than if she had studied.
- Outcome of studying (foregone): 10 extra exam points (no $40).
- Therefore the value she sacrificed by working is the 10 exam points she would have gained by studying.

4) Why the correct answer is correct
- Opportunity cost is the forgone benefit from the next best alternative; the next best alternative to working was studying, whose benefit was the 10-point higher score. So the opportunity cost equals the 10 points lost.

5) Why the other choices are incorrect
- (a) Time spent working instead of relaxing: relaxing is not presented as the next best alternative; the relevant tradeoff given is studying vs. working. 
- (c) The benefit of scoring higher on the exam: this is a vague restatement; the precise forgone benefit is the specific 10 points lost. Option (b) names that exact forgone benefit.
- (d) The $40 earned: that is the benefit she received from her choice, not what she gave up — thus not the opportunity cost.

6) Conclusion
The opportunity cost of her decision is the 10 points lost on the exam, so the correct answer is b.

Suppose a student decides to spend two hours working at a part-time job instead of studying for an exam. She earns $40 from the job but scores 10 points lower on the exam than she otherwise would have. What is the opportunity cost of her decision?Single choice

Similar Questions

The Blank ______ cost of any resource used to produce a good is the value or worth the resource would have in its best alternative use.

The opportunity cost of producing capital goods today is:

11. XYZ Corp spent $1500 on a new computer. The opportunity cost of the computer was: A. $0, because it is a sunk cost B. $0, because it is an explicit cost C. $1500, the amount spent on the computer D. $1500 minus the amount XYZ could get reselling it

You are a taxi driver in Melbourne who earns A$60 for a day’s work. You have been offered a one-day ticket to the Australian Open for A$20. As a tennis fan, you value the experience at A$150. With this information, read the following statements and select the correct one(s).

You are a taxi driver in Melbourne who earns A$50 for a day’s work. You have been offered a one-day ticket to the Australian Open for A$40. As a tennis fan, you value the experience at A$100. With this information, read the following statements and select the correct one(s).

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler