Question

Abby received requests from three families to babysit a toddler for four hours on Friday night. She can only babysit for one of the three families. The Fleming family offered her $20, the Gilbert family offered her $30, and the Lewis family offered her $40. If Abby chooses to babysit for the Lewis family her opportunity cost of this decision is:a. $50.b. $30.c. $20.d. $40.

Answer 1

Answer:

The correct answer is letter "B": $30.

Explanation:

Opportunity cost is the return of an option taken over the return of the option forgone. It represents what is obtained with the choice taken in terms of the choice dismissed. Opportunity cost is also defined as the best next alternative left behind after choosing another.

In Abby's case, she chose to babysit The Lewis' toddler who will pay her $40. The best next alternative was The Gilbert's who offered $30. Thus, those $30 represent Abby's opportunity cost of babysitting The Lewis' child.