You have one scarce hour to spend between studying for an examination or taking classes in a tutorial for Rs. 200 per hour. You choose to study for examination. What is the opportunity cost of studying?
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Expert's answer
2021-01-13T13:45:39-0500
Answer:
The two alternatives here are to spend one hour studying for an examination to spend one hour taking classes in a tutorial for Rs. 200 per hour.
When alternative of studying for an examination is chosen then the next best alternative is taking classes in a tutorial.Â
Opportunity cost is the benefits that are sacrificed when next best alternative i.e. taking classes in a tutorial is not chosen.
The benefit of taking the classes in tutorial for one hour are earning Rs. 200
The benefits of taking classes in a tutorial are sacrificed i.e. earnings of Rs. 200 are sacrificed and thus Rs. 200 becomes the opportunity cost when we choose to spend one hour studying for examination.
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