Answer to Question #234638 in Microeconomics for Aashish Kumar

Question

You have one scarce hour to spend between playing for a tournament or taking classes in a tutorial for Rs. 500 per hour. You choose to play for tournament. What is the opportunity cost of playing?

Answer 1

The two alternatives the individual faces in this question are to spend one hour playing for a tournament and spend one hour to a tutorial class for Rs 500 per hour.

when the alternative of playing for a tournament is chosen then the next best alternative available to the individual is taking tutorial classes

The opportunity cost here is the next best alternative available. That is taking tutorial classes is not chosen by the individual.

As indicated in the question the benefit realized from taking tutorial classes is Rs 500

These earnings are sacrificed and therefore the opportunity cost becomes Rs 500 when the individual chooses to play for a tournament.

Thus opportunity cost is Rs 500