Question

Suppose that you could either prepare your own tax return in 15 hours or hire a tax specialist to prepare it for you in 2 hours. You value your time at $11 an hour; the tax specialist will charge you $55 an hour. The opportunity cost of preparing your own tax return is _______

Answer 1

Answer:

$165

Explanation:

Opportunity cost is the cost (or benefit lost) from choosing one activity or investment over another. In this case, if you decide to prepare your own tax report instead of paying a tax specialist, then your opportunity cost = 15 hours x $11 per hour = $165. By preparing your tax return yourself, you are losing 15 hours and you value your time at $11 per hour.