Answer to Question #227975 in Microeconomics for Graylin Lapi

Question

a)     John is an economist working for Ministry of Tourism in Suva, earning $30,000 per year. There are, say, three alternative careers available for John. He can work for Reserve Bank or Ministry of Economy in Suva for $25,000 and $28,000 per year respectively. Still another alternative is that he can set up his own economic consultancy firm, expecting to make a profit of $27,500 a year for himself. What is John’s opportunity cost of working in Ministry of Tourism?

 

Answer 1

Solution:

The correct answer I $28,000.

The opportunity cost of working in Ministry of Tourism is $28,000 since working in the Ministry of Economy is the next best alternative for John.